UAE sets new sugar-based taxes for sweetened drinks as 2026 rollout nears

Dubai: The Federal Tax Authority has outlined how companies must apply the sugar-based excise tax that replaces the flat 50 per cent levy on sweetened drinks from January 1, 2026. The guidance explains how tax rates will depend on sugar and sweetener levels in each beverage, offering retailers, importers and producers clearer instructions ahead of the transition.

Under the “tiered volumetric model”, excise duties are based on how much sugar is present per 100 millilitres. “The resolution introduces a tiered excise tax system for sweetened beverages, with the tax rate determined by the sugar content per 100 milliliters.” Drinks with eight grams or more fall into the highest band, those with at least five grams but less than eight enter the mid-tier, and beverages under five grams are exempt. Products containing only artificial sweeteners are also exempt.

These bands will now shape pricing and product strategies across the supply chain. The Ministry of Finance said the amendment “aims to establish a unified legislative framework that clearly defines excise goods and their applicable tax rates and values, making it easier for all taxable persons to understand, comply with, and fulfill their obligations.”

The new cabinet decision sets the exact amounts companies will pay per litre.

These rates replace the previous percentage-based structure under the previous 2019 cabinet resolution. According to the Ministry, the changes form part of the UAE’s work “to promote public health and encourage healthier consumption habits across the community.”

The authority has reminded companies that higher sugar content directly increases tax at the shelf level. This shift places sugar composition — rather than product price — at the centre of the excise calculation.

The FTA has told beverage businesses to verify and record sugar content well before the deadline. Companies must secure accredited laboratory reports and obtain a conformity certificate confirming sugar and sweetener levels. These documents will support product registration and ensure correct placement within the tax tiers.

The Ministry noted that “in such cases, the tax shall be applied according to the highest sugar content category” if a company fails to submit required documentation. That default classification will remain until an approved laboratory report is provided. Businesses handling imported stock, large inventories or multiple product lines have been urged to review all entries to avoid unintended tax liabilities.

The authority says producers, importers and retailers should now audit sugar values across their beverage portfolios, confirm which items shift between tiers, and update procurement and pricing strategies ahead of the rollout.

The move replaces a one-size-fits-all tax with a model that links excise duty directly to product formulation. The Ministry of Finance said these amendments “align with the government’s commitment to promoting public health and reducing the financial burdens associated with diseases linked to excessive sugar consumption.”

The FTA expects the new structure to reduce disputes over classification and support more predictable cost planning. The tax reform may also push manufacturers toward lower-sugar formulations as they weigh the financial impact of each tier.

All amendments related to the tiered model will take effect for taxable persons on January 1, 2026. The Ministry said the framework “supports both consumers and investors” by creating clearer rules and more consistent application across the market.