Decoding the UAE’s New Excise Tax Framework on Sweetened Beverages
Overview: The UAE Federal Tax Authority (FTA) has introduced a major reform to the Excise Tax regime for sweetened beverages. Effective 1 January 2026, the traditional flat 50 percent Excise Tax will be replaced by a tiered volumetric model that taxes beverages according to their sugar content per 100ml. This new model aligns fiscal policy with public health objectives and incentivizes manufacturers to reduce sugar levels in their products.
Background
Excise Tax was first introduced in the UAE under Federal Decree-Law No. 7 of 2017, supported by Cabinet Decision No. 52 of 2019. Sweetened drinks have historically been taxed at a fixed rate of 50 percent of their Excise Price. In 2025, Cabinet Decision No. 99 amended the framework, enabling the transition to a content-based taxation system. FTA Public Clarification EXTP012 further explains the mechanics of this new regime.
Visual Insight: The Shift from Flat Rate to Tiered Taxation
OLD MODEL (2019–2025)
- Flat 50% Excise Tax Rate
- Based on Retail Selling Price
- One Rate for All Sweetened Drinks
- Not linked to health outcomes
NEW MODEL (Effective 2026)
- Tiered by Sugar Content
- Based on Grams of Sugar per 100ml
- Low / Moderate / High Sugar Categories
- Strong public health alignment
Key Changes Introduced
1. From Flat Rate to Tiered Volumetric Taxation
Starting 1 January 2026, Excise Tax will be determined by the beverage’s sugar concentration per 100ml. Products with higher sugar content fall under higher tax brackets, while drinks with low or no sugar may attract lower or zero Excise Tax.
Tax Model Comparison
| Feature | Old System (2019–2025) | New System (Effective 2026) |
|---|---|---|
| Tax Basis | 50% of Excise Price | Sugar content per 100ml |
| Calculation Method | Ad valorem (value-based) | Volumetric (content-based) |
| Product Classification | One category | Low, Moderate, High Sugar |
| Health Policy Alignment | Minimal | Strong |
| Incentive Structure | Flat rate | Encourages reformulation |
2. Sugar-Based Classification Categories
Sweetened drinks will now be classified into one of four categories:
| Sugar Content per 100ml | Category | Indicative Treatment |
|---|---|---|
| ≥ 8 g | High Sugar Drink | Highest Excise Tax rate |
| ≥ 5 g and < 8 g | Moderate Sugar Drink | Medium tax rate |
| < 5 g | Low Sugar Drink | Lowest or zero rate |
| 0 g (only artificial sweeteners) | Artificially Sweetened | 0% Excise Tax |
3. Laboratory Certification Requirement
All manufacturers and importers must provide MOIAT-accredited laboratory reports showing total sugar content. Without certification, FTA will classify the drink automatically as a High Sugar category.
Implications for Businesses
- Need for updated ERP and accounting systems to map sugar-based tax rates.
- Pricing strategies may shift based on variable tax tiers.
- Potential product reformulation to reduce sugar content.
- Increased documentation and compliance requirements.
- Transitional stock rules may impact inventory valuation.
Example Scenarios
Scenario 1: Moderate Sugar Drink
Product: 500ml bottle, 6g sugar per 100ml
Excise Price: AED 2.00
| Basis | Old System | New System |
|---|---|---|
| Applicable Rate | 50% of Excise Price | Moderate Tier (TBD) |
| Excise Payable | AED 1.00 | Expected lower than AED 1.00 |
| Classification | Sweetened Drink | Moderate Sugar |
Scenario 2: Zero-Sugar Drink
Product: 330ml can, 0g sugar, contains sucralose
Excise Result: 0% Excise Tax
Scenario 3: 100% Natural Juice
Natural fruit juices with no added sugar remain fully exempt from Excise Tax under the amended framework.
How Univia Can Help
Univia Global Consultancy helps businesses prepare for the tiered volumetric model by assessing product tax exposure, supporting ERP tax integration, coordinating laboratory certifications, and advising on pricing and reformulation strategies. Our approach ensures operational readiness ahead of the January 2026 implementation.
Advisory Note for CFOs, Tax Directors, and F&B Leaders
The shift to a content-based taxation model impacts costing, compliance, supply chain decisions, and long-term pricing. Executives should initiate early reviews of formulations, reporting systems, and inventory strategies to stay ahead of regulatory requirements.
Source Attribution: Information referenced from UAE Federal Tax Authority publications including Cabinet Decision No. 52 of 2019 (as amended by Cabinet Decision No. 99 of 2025) and Public Clarification EXTP012 (2025).
Share this Post
Blog Categories
Uncategorized
