UAE Excise Tax Overhaul: How the New Sugar-Based Levy Will Reshape Sweetened Drinks from 2026

The UAE Excise Tax overhaul for sweetened drinks signals a shift from flat-rate duties to a tiered volumetric system that charges based on sugar and sweetener content per litre, effective from January 1, 2026. The UAE Excise Tax redefines how the drinks market is taxed, with clear bands that align prices to sugar content and create strong incentives for healthier choices. Early preparation, compliance and certification will shape how businesses navigate this shift. Drinks with more sugar pay more, low-sugar or artificial alternatives pay none, and the UAE Excise Tax rules will influence pricing across shelves and supply chains.

1. Introduction

From January 2026, the UAE Excise Tax rules are changing in a big way. Business leaders and beverage makers must be ready. The new system replaces a flat tax with a sugar-based model that links UAE Excise Tax to the actual sugar and sweetener content per litre of drink. The change is not just regulatory noise. It is a clear signal that how tax is applied in this market is shifting to greater transparency, fairness, and health alignment. Get prepared early and stay compliant under the new UAE Excise Tax system.

2. Understanding the UAE Excise Tax Shift

The incoming UAE Excise Tax framework is grounded in a tiered-volumetric model, meaning drinks are taxed not by price or label category, but by the amount of sugar and sweeteners they contain per 100ml. This replaces the old 50% flat excise duty for sweetened drinks with clear rates tied to sugar content.

Under the UAE Excise Tax:

• High-sugar sweetened drinks (8g or more sugar per 100ml) face a higher tax per litre.
  
• Moderate-sugar drinks (5g to less than 8g) have a mid-level tax.
  
• Low-sugar drinks (less than 5g) are tax-exempt.
  
• Drinks with only artificial sweeteners also pay zero under the UAE Excise Tax structure.
  

This approach recalibrates the pricing landscape and ties product formulation to tax outcomes in a direct way. No longer will a sugary drink and a lightly sweetened alternative carry the same levy.

3. Why the New UAE Excise Tax Matters

This is more than a numbers game. The revised UAE Excise Tax strategy shifts how businesses plan product portfolios, set prices, and communicate with consumers. Taxes are now more predictable because they hinge on measurable sugar content, not on broad product categories.

Manufacturers and importers must test drinks to determine exact sugar levels and assign each product to the proper UAE Excise Tax band. If no certified lab report is provided, the product defaults to the highest sugar category for tax purposes.

Carbonated drinks will no longer have a separate tax class under the UAE Excise Tax rules. Their taxation will be based purely on sugar metrics. Energy drinks remain outside this model and are still subject to a 100% excise tax under existing rules.

4. What Business Leaders Need to Do

Leaders in beverage supply chains should prioritise readiness. The UAE Excise Tax system hinges on accurate sugar content reporting, credible lab certifications and timely registration with the Federal Tax Authority.

Here are the practical steps:

• Test products at accredited labs to quantify sugar and sweeteners.
  
• Secure Emirates Conformity Certificates for sugar content before submitting excise registrations.
  
• Update pricing and contracts to reflect UAE Excise Tax band changes.
  
• Reclassify SKUs and inventory systems to align with the new model.
  

Getting these pieces in place now will help avoid compliance warnings and mismatches when the UAE Excise Tax goes live.

5. Broader Market Effects

Because the UAE Excise Tax ties cost to sugar levels, drinks with lower sugar become more attractive on price points. This change may accelerate product reformulation and innovation. Drinks that hit zero tax under the new UAE Excise Tax model can gain a competitive edge on shelf price without sacrificing quality.

This transition also aligns UAE policy with broader Gulf Cooperation Council efforts to standardise health-related tax measures, promoting transparency and healthier consumption trends across markets.

6. Conclusion

The UAE Excise Tax overhaul for sweetened drinks marks a transition from a percentage-based duty to a sugar-content-based system that takes effect in January 2026. The shift brings greater fairness and a direct link between health-related metrics and taxation. Business planning must now factor in sugar bands, product labelling, pricing and compliance protocols. Firms that embrace the new UAE Excise Tax structure early stand to benefit from clearer pricing signals and stronger market positioning. Arnifi stands ready to support organisations through this change, helping them navigate the new rules with confidence and precision.