The United Arab Emirates (UAE) has expanded its excise tax regime to include a more refined approach to taxing sweetened beverages. Historically, this tax targeted harmful goods such as tobacco, energy drinks, and carbonated beverages to discourage consumption and improve public health. From January 1, 2026, the UAE has introduced a tiered sugar-based excise tax on sweetened drinks, replacing the old flat tax structure with one that links tax rates directly to sugar content.
Excise tax is an indirect tax levied on goods that are considered harmful to health or the environment. In the UAE, excise tax is applied at the point of manufacture or import and is separate from the country’s 5% value-added tax (VAT). The tax is intended to reduce consumption of certain products while generating revenue for the government.
Until recently, excise tax on sweetened beverages was a flat rate of 50% of the retail price. This applied to all drinks containing added sugar or sweeteners, regardless of how much sugar they contained.
From January 1, 2026, the UAE began implementing a tiered volumetric excise tax model for sweetened beverages. Rather than applying a flat percentage of retail price, the new system calculates excise duty based on the actual sugar content per liter of drink.
The shift reflects several policy goals:
Promote healthier diets by discouraging high sugar consumption.
Encourage product reformulation to reduce sugar content.
Align UAE policy with international health and taxation standards.
Provide a more predictable and transparent tax method for businesses.
Under the new rules, sweetened beverages are classified into sugar tiers, each with its own excise rate per liter:
| Sugar Content (per 100ml) | Excise Tax (AED per liter) | Impact |
|---|---|---|
| Less than 5g | 0 AED | Tax-exempt |
| 5g to less than 8g | 0.79 AED | Moderate tax |
| 8g or more | 1.09 AED | Higher tax |
| Only artificial sweeteners | 0 AED | Tax-exempt |
Sweetened drinks that include artificial sweeteners only (no added sugar) are also exempt from tax, while drinks with higher sugar levels face higher tax per liter.
The new excise tax applies to:
Sweetened soft drinks and sodas
Flavored fruit drinks and juices with added sugar
Sweetened iced teas and lemonades
Drink concentrates, powders, and syrups that will become sweetened beverages
Drinks containing natural sugars plus added sugar or sweeteners FTA UAE
Certain drinks remain exempt from this tax:
100% natural fruit or vegetable juices with no added sugar
Drinks with only artificial sweeteners
Milk and dairy drinks
Medical or dietary nutritional beverages
Freshly prepared drinks not sold in retail packaging
Energy drinks remain subject to a 100% excise tax under the existing regime and are not included in the tiered model.
High sugar drinks may become more expensive, pushing consumers toward lower sugar or sugar-free alternatives.
Healthier drink options may be more competitively priced due to lower or zero excise tax.
Consumers may notice clearer price differences aligned with sugar content.
Manufacturers and importers must register beverages and submit sugar composition data to the Federal Tax Authority (FTA).
Labels and pricing may need updating to reflect tax changes and sugar content.
Reformulation of products to lower sugar content can reduce excise tax liabilities.
Inventory and supply chain strategies may shift to optimize costs ahead of the transition.
The UAE’s revised excise tax on sweetened drinks is designed to contribute to broader public health strategies aimed at reducing obesity, diabetes, and other diet-related diseases. By linking tax directly to sugar content, the policy not only discourages excessive sugar consumption but also encourages industry innovation and consumer choice.
The policy aligns the UAE with global soft drink sugar tax trends, similar to models adopted in Europe and parts of Asia, where tiered sugar taxes have shown promising impacts on consumer behavior and product reformulation.
The UAE’s new excise tax on sweetened beverages, effective from January 1, 2026, marks a significant shift from a flat-rate excise regime to a tiered, sugar-based tax model. With different excise rates tied to sugar content, the new system encourages healthier products in the market while maintaining fiscal and public health objectives. Businesses and consumers alike will need to adapt to this change, which reflects both international best practices and the UAE’s commitment to promoting a healthier society.
