UAE to Implement Tiered Sugar Content-Based Excise Tax on Beverages from January 2026
Dubai, October 2025 – The UAE is changing how it taxes sugary drinks.
From January 1, 2026, the excise tax will no longer be a flat 50%. It will depend on how much sugar a drink actually contains.
The Ministry of Finance confirmed this week that the new model i.e. a tiered, sugar-based excise system is now written into national legislation. It aligns with the GCC’s unified approach, where countries are adopting a more refined, content-driven method for taxing sweetened beverages.
For businesses, that means a fresh layer of compliance. Knowing which products fall into which tax tier and how to claim deductions on previously taxed stock will take careful planning. ADEPTS tax advisory team guides UAE businesses through new excise frameworks, helping you classify products correctly, avoid overpayments, and stay fully compliant when the new system kicks in.
From Flat to Flexible
Since 2017, the UAE has taxed all sugar-sweetened drinks at a single 50% rate. Simple, yes, but it treated all drinks the same. A lightly sweetened iced tea paid as much tax as a can loaded with 10 teaspoons of sugar.
This new tax update is all set to change that. From 2026, rates will be tiered by sugar concentration in drinks which will be measured per 100 millilitres. More sugar, more tax. Less sugar, less tax. It is that simple.
The goal is very clear here: push manufacturers to cut sugar and give consumers a price signal to choose better options. It’s also about precision. The new model connects health policy with fiscal logic, encouraging reformulation instead of blanket taxation.
Key Features of the Legislative Amendments
The Ministry says the legal amendments build a full framework for this shift. The Federal Tax Authority (FTA) will run the rollout and publish detailed guidance next year.
Graduated Tax Brackets
The old 50% flat rate? Gone. In its place come graduated tax brackets based on actual sugar or sweetener levels. Businesses will have to measure, label, and report those figures accurately. This will result in more accurate measuring and more thought being poured into cutting sugar content.
Deduction Rule
The update also introduces a deduction rule for unsold stock. If a company paid the old 50% tax before 2026, and that same product now qualifies for a lower rate, they can claim back part of the difference. Fair play, especially for large distributors holding inventory into the new year.
The intent is simple: prevent double taxation and make the transition clean.
Implications for Businesses
For producers and importers, this isn’t just a number change. It’s an operational one.
Sugar levels now matter and they must be tested, verified, and documented. Manufacturers will likely need certified lab results. Importers must ensure their suppliers’ labels and product data meet UAE standards.
Pricing will also need a rethink. Some products could face higher rates; others might get relief. Finance teams will need to model margins again under the new brackets. This tax will bring about quite a few noticeable changes in the prices of drinks.
At the same time, it is quite revolutionary in terms of public health. Brands now have incentive to cut on sugar. Those that cut sugar or launch healthier variants will gain both tax and market advantages. We’ve seen this pattern elsewhere – reformulation first, innovation next.
Still, adjustment takes time. That’s why the early notice matters. With more than a year before rollout, companies have a clear runway to adapt.
Public Health and Economic Objectives
This isn’t just a fiscal reform. It’s public health policy in action.
The Ministry says the change supports the UAE’s long-term wellness goals i.e. reducing sugar intake, curbing obesity, and addressing lifestyle-related diseases. By tying tax directly to sugar, the system rewards better choices rather than just penalizing consumption. Manufacturers will feel a push towards less sugar which means better health in general.
Globally, the World Health Organization supports these models. Countries using tiered sugar taxes often see both lower sugar content and stable tax revenues.
Economically, the UAE’s approach is pragmatic. It fine-tunes the tax base while keeping the system efficient. It also reduces distortions that come from one-size-fits-all rates.
That balance between fiscal strength and public health is what the reform is designed to deliver.
Impacts for Consumers
Your soft drink shelf is going to change for good now. The classic, high-sugar sodas and energy drinks? Rethink or expect a price hike. Mid-sugar ones might hold steady. And the “zero” or low-sugar cans? They’ll probably become the cheaper pick.
This tax will not only shift manufacturers’ concerns but it will also help change habits for the people in the long run. Families who fill their carts with juices and fizzy drinks each week will start spotting small savings when they choose the lighter versions. Things can start changing in just a few months.
Retailers and distributors will feel the ripple too. The new rules let businesses reclaim part of the old 50% tax on any unsold stock that ends up in a lower tax bracket. It’s a fair cushion. But there’s still work ahead – relabeling shelves, reclassifying goods, and updating systems to track the new sugar-based tiers.
Regional Coordination
The UAE isn’t moving alone. The GCC Unified Excise Tax Agreement aims to align member states on how they treat sugar-sweetened drinks. The UAE’s amendments fit right into that framework.
For multinational beverage companies, harmonization means fewer inconsistencies between markets. Less paperwork. Fewer tax surprises. It is more about building a culture of health.
And for regulators, it strengthens oversight. Shared rules make it easier to compare data, track imports, and manage cross-border enforcement.
That’s the bigger picture – a more connected regional tax environment.
Government’s Direction
The Ministry described the reform as part of its work to keep the UAE’s tax system modern and adaptable. Clear. Predictable. Transparent. It’s not just about this one policy. It’s about building trust and showing that the system evolves with logic, consultation, and foresight.
The FTA will soon release detailed implementation guides, including sugar testing methods and reporting formats. Industry workshops are expected in 2025 to help businesses prepare.
January 1, 2026, is the go-live date. No extensions mentioned. Businesses that plan early, test products, update records, train staff, will be ready. Those who wait will scramble.
The Bigger Impact
For consumers, prices may start to reflect sugar content more directly. A higher-sugar soda could cost more than a lightly sweetened drink from the same brand. That’s intentional – the tax design encourages better choices through pricing, not prohibition.
For businesses, it’s a nudge to innovate. Reformulated beverages, alternative sweeteners, and transparent labelling could all gain traction under the new regime.
And for the UAE, the reform fits a pattern: precision over simplicity, health over habit, and alignment over isolation.
The tax is small in scope but large in signal. It shows how the UAE continues to link economic policy with long-term social goals.
References
- UAE Ministry of Finance announcement, October 2025.- https://mof.gov.ae/en/news/ministry-of-finance-proposes-legislative-amendments-to-support-the-implementation-of-the-updated-excise-tax-policy-on-sugar-sweetened-beverages/
- Strengthening taxes on unhealthy products in the Gulf States https://www.undp.org/sites/g/files/zskgke326/files/2025-03/ghc_synth_health_tax_brief_2023_v16_090924.pdf
- “New UAE sugar tax on beverages takes effect January 2026” https://www.khaleejtimes.com/uae/new-uae-sugar-tax-on-beverages-takes-effect-january-2026
