- UAE to tax sugary drinks based on sugar content starting 2026.
- Flat 50% tax on sweetened drinks will be replaced by a sugar-based tiered system.
- More sugar = higher tax; less sugar = lower tax.
- Change aims to cut sugar intake and encourage healthier products.
- Businesses get time to prepare; full rollout in 2026.
The UAE Federal Tax Authority (FTA) has announced a major reform to its excise tax system, linking future tax rates on sugar-sweetened beverages (SSBs) to their sugar content. Starting in 2026, the current flat 50% tax will be replaced by a tiered model based on the amount of sugar per 100ml, part of a wider effort to reduce sugar consumption and support healthier choices.The move, announced on Friday, July 18, 2025, supports the UAE’s broader goals: lowering the intake of harmful products, improving public health, and diversifying revenue beyond oil. Since 2017, excise tax has applied to goods like tobacco, energy drinks, carbonated drinks, and later, sweetened beverages and electronic smoking devices.This latest update represents a shift from a “one-size-fits-all” tax model to a tiered, volumetric approach, which will better reflect the health impact of individual products.
Sugar-Based Tiered Taxation Model Starting in 2026
Starting in 2026, the excise tax applied to sweetened beverages will depend on how much sugar is in the product rather than simply its category. Under the existing model, sweetened drinks, including ready-to-drink sodas, energy drinks, and powdered drink mixes, are taxed at a flat 50% rate. Under the new model, beverages with higher sugar content per 100ml will be taxed at a higher rate per litre, while those with lower sugar content will be taxed less. This is intended to encourage manufacturers to reformulate their products with less sugar, leading to a wider availability of healthier options in the market. The FTA emphasized that the new system is being introduced not just to change pricing, but to support a meaningful shift in consumer behaviour and manufacturing standards. “The new policy is designed to incentivize healthier formulations,” the authority noted, and may make healthier beverages more affordable and accessible to UAE residents.
Timeline, Stakeholder Support & Implementation Strategy
The FTA’s announcement gives businesses, particularly local beverage manufacturers and importers, ample time to prepare for the transition. The authority confirmed that the rollout will occur in 2026, giving stakeholders well over a year to plan, adapt their production lines, and modify product formulations where necessary. To facilitate the change, the FTA will conduct a series of awareness campaigns to ensure stakeholders fully understand the upcoming policy. The implementation of the system is being conducted in close coordination with the Ministry of Health and Prevention, to ensure the tax mechanism aligns with national public health strategies and delivers measurable improvements in dietary consumption patterns. The FTA also stated that additional technical details and implementation guidelines will be announced in due course to support full industry compliance.
Excise Tax in the UAE: What It Covers and Why It Matters
Excise tax in the UAE is governed by Federal Decree-Law No. 7 of 2017 and was introduced as an indirect tax to:
- Reduce consumption of hazardous and harmful products.
- Promote long-term public health improvements.
- Support environmental protection, especially through reduced use of electronic smoking devices.
- Diversify government revenues away from oil.
- Establish a robust regulatory compliance framework for harmful goods.
- Raise consumer awareness through pricing transparency and deterrent taxes.
The excise tax was introduced in 2017 on tobacco, carbonated drinks, and energy drinks, and expanded in 2019 to cover electronic smoking devices, their liquids, and sugar-sweetened beverages.
5. Current Excise Tax Rates and Coverage (Existing Regime)
Here are the current excise tax rates under the existing system:
| Product Category | Excise Tax Rate |
|---|---|
| Tobacco products | 100% |
| Energy drinks | 100% |
| Electronic smoking devices | 100% |
| Liquids used in electronic smoking devices | 100% |
| Products with added sugar or sweeteners (SSBs) | 50% |
| Carbonated drinks | 50% |
Exemptions from Sweetened Beverage Tax (Under Existing Regime):
- Beverages containing at least 75% milk or milk substitutes
- Infant formula and baby food
- Medical or dietary nutrition products
Alcoholic beverages (regulated separately)
FAQs:
Q: What is changing in the UAE’s excise tax on sugary drinks?From 2026, the tax will be based on sugar content instead of a flat 50%.Q: Why is this change happening?To reduce sugar consumption, improve public health, and support healthier choices.Q: Which drinks will be affected?All sugar-sweetened beverages, including ready-to-drink and powdered mixes.Q: Will all sugary drinks be taxed the same?No. Higher sugar drinks will be taxed more; lower sugar drinks will be taxed less.Q: Do businesses have time to adjust?Yes. The policy starts in 2026, and the FTA will provide support and guidance.
