UAE Introduces New Tiered Excise Tax on Sweetened Drinks

For several years, the excise tax in Dubai has targeted products that harm public health, such as tobacco, energy drinks and carbonated beverages. 

U.AE Sweetened drinks were later brought into scope to slow rising sugar consumption and support wider wellness goals. The UAE is moving excise tax in Dubai for sweetened drinks away from the current flat 50% rate to a tiered system based on sugar content.

A Cabinet Decision has approved a new excise system that uses sugar bands for sweetened drinks sold in the UAE.

Importers, bottlers and cafes must learn these bands before 2025 so they can update prices, contracts and accounting systems in time.

How Does The Current UAE Excise Framework Work?

Under the present rules, excise tax applies to several product groups, including carbonated drinks, energy drinks, tobacco products and sweetened drinks.

The government portal of UAE explains that carbonated drinks usually face 50 percent excise on the retail selling price, while energy drinks and tobacco products face 100 percent.

Sweetened drinks sit alongside these categories and already attract excise, but the rate is not yet broken into sugar brackets. The official guidance also sets out registration and filing duties for any business that imports, produces or releases excise goods for consumption in the UAE.

This structure has been effective at raising revenue and signalling health priorities, yet it can treat low sugar and high sugar products in the same way. The planned tiered system tries to close that gap.

How Does The New Tiered System Work?

Cabinet Decision amendments and FTA Public Clarification EXTP012 confirm that sweetened drinks will move to a tiered volumetric model effective 1 January 2026.

The intention is to reward reformulation, nudge consumers toward lighter options and keep the highest burden on products that drive obesity and diabetes risks. Exact bands and percentages will be finalised in detailed executive regulations and Federal Tax Authority guidance.

Those texts will clarify how to treat concentrated syrups and drinks that use non sugar sweeteners. Businesses should expect transitional rules that give time to run down old stock, but once the system begins, new production and imports will need to meet the updated criteria to avoid misclassification.

Sugar Bands and Examples Under the New System

The new tiered excise tax in Dubai for sweetened drinks functions through three sugar bands:

• High sugar drinks. sugar content at or above a threshold around 8 grams per 100 ml, facing the highest excise charge per litre.
• Medium sugar drinks. sugar content between the lower and upper thresholds, taxed at a mid-level rate.
• Low sugar drinks. sugar content below the lower threshold, with a lower rate, while products sweetened only with artificial sweeteners face 0 percent excise.

Consider three common products. A cola with 11 grams sugar per 100 ml will go in the high sugar category. A lightly sweetened iced tea with 6 grams/100 ml falls in the middle sugar drinks category. However, a zero-sugar cola with only artificial sweeteners will stay in the 0 percent tier.

Commercial Impact on Importers and Cafes

The new excise tax in Dubai will not hit every business in the same way. High sugar soft drinks, sweetened iced teas and energy style beverages are likely to feel the largest impact once the upper tier rate applies. 

Drinks that stay close to a proposed sugar limit may need reformulation decisions, while low sugar products might enjoy stronger marketing positions if their excise rate stays lower.

Distributors and retailers face practical questions too. Price points must still look sensible on shelves and menus after excise, VAT and margin. Long term contracts that bundle drinks with other services might need reopening so that tax risk does not sit with the wrong party. 

For cross border groups, transfer pricing and royalties also need a second look, since excise changes can alter profit splits between related entities.

Final Thoughts

Tiered excise sends a simple signal: lower sugar pays less tax and high sugar pays more. UAE firms now need clean SKU records and tested excise mappings, not just talk about health policy. 

Arnifi’s accounting and bookkeeping teams set up ledgers and reports that show excise per product and per channel, keeping evidence ready for the FTA. Also, it helps management maintain a steady view of which lines still make sense to keep or reprice.

FAQs

When will the new tiered excise tax on sweetened drinks start in the UAE?

The new bands will start after the detailed rules come out. Current signals point to around 2025, but the final start date will follow Federal Tax Authority announcements.

Which drinks are likely to fall into the highest excise tier?

Drinks with very high sugar per 100 ml. This includes strong soft drinks or energy drinks, which are likely to sit in the top band once the rules are confirmed.

How does the tiered system interact with existing excise tax categories?

The tiers will apply inside the current excise rules for sweetened drinks. Carbonated drinks are still taxed at 50% of retail price and energy drinks at 100%.

Do small cafes and restaurants need to register for excise tax?

Size does not decide excise duty. Any business that imports, makes, or releases excise goods in the UAE must register if it meets the tests in FTA guidance.

Why should businesses consider external help with the new excise bands?

Tiered excise changes recipes and prices at the same time as the tax entries. Arnifi’s accounting and bookkeeping team can link sugar data to your numbers so plans are based on clear calculations instead of rough guesses.