UAE Introduces New Sugar-Based Excise Tax System for Sweetened Drinks Starting 2026

The United Arab Emirates has announced a major change in the way it taxes sweetened beverages. From early 2026, the country will shift to a new sugar-based system called the Tiered Volumetric Model.

This model links the excise tax to the actual amount of sugar in each drink instead of applying a fixed percentage. The aim is to encourage manufacturers to reduce sugar levels and help consumers make healthier choices.

This change is important for many Indian businesses that export beverages to the UAE or operate manufacturing units serving the Gulf market. It will also interest Indian residents living in the UAE, as the prices of many popular drinks may change depending on their sugar levels.

How the New System Works

Under the current system, excise tax is applied at a fixed rate based on the retail price. Under the new tiered-volumetric model, excise tax will be calculated according to how many grams of total sugar and other sweeteners are contained in every 100 millilitres of the drink.

Total sugar includes natural sugar, added sugar, and other sweeteners such as honey. If a drink contains only natural sugar and no added sweeteners, it will not be treated as a sweetened beverage and will not be taxed.

If a drink contains only artificial sweeteners and no sugar, it will be classified as a sweetened drink but taxed at zero percent. These drinks will still require registration and laboratory certification.

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The UAE Federal Tax Authority (FTA) has created four categories for sweetened drinks based on sugar content:

• High sugar drinks - 8 grams or more of sugar or sweeteners per 100 ml.
• Moderate sugar drinks - 5 grams or more but less than 8 grams per 100 ml.
• Low sugar drinks - Less than 5 grams per 100 ml.
• Drinks containing only artificial sweeteners

Classified as sweetened drinks, but taxed at 0 percent.

The more sugar a drink contains, the higher the excise tax will be. Drinks that contain only artificial sweeteners will not be taxed under this model, but all classification, registration and reporting requirements still apply.

What Happens to Carbonated and Energy Drinks

Under the new rules, carbonated drinks will no longer exist as a separate excise category. They will be taxed based purely on their sugar content, just like any other sweetened drink.

Energy drinks remain unchanged. They will continue to be taxed at 100 percent of the excise price under the existing method and will not be included in the new sugar-based model.

Drinks that are Exempt

Several types of beverages will not be considered sweetened drinks under the new rules and will therefore not be taxed. These include:

• 100 percent natural fruit and vegetable juices with no added sugar or other sweeteners
• Drinks containing at least 75 percent milk or milk substitutes
• Baby formula, follow-up formula and baby food
• Drinks intended for medical or special dietary use
• Beverages prepared by individuals for personal consumption
• Drinks prepared and served fresh in restaurants or cafes in open, non-sealed containers

These exemptions are particularly relevant to Indian exporters of dairy beverages and natural juices.

How to Calculate the Tax

Below is a simplified example showing how excise duty would be calculated for a sweetened drink:

Example:

• Volume: 1 litre (1000 ml)
• Sugar content: 7 grams per 100 ml (moderate sugar category)

Step 1: Confirm category

• 7 grams per 100 ml places the drink in the “moderate sugar” category.

Step 2: Determine total sugar

• A 1-litre drink contains 10 servings of 100 ml each.

Therefore: 7 g × 10 = 70 g of sugar in total.

Step 3: Apply the tax rate

The exact tax rate per tier will be announced by the UAE Cabinet as part of the 2026 regulations. If moderate-sugar drinks are taxed at “X AED per litre”:

• Excise duty = X AED × 1 litre.

The final rate will depend on the official Cabinet decision.

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Certification Requirements for Businesses

Producers, importers, and stockpilers must obtain a UAE Certificate of Conformity for each beverage. This certificate must be supported by a laboratory test issued by a lab accredited by the Ministry of Industry and Advanced Technology (MoIAT). The lab report must show:

Whether the drink contains added sugar

• Whether the drink contains other sweeteners
• Whether the drink contains artificial sweeteners
• The total sugar content (natural, added and other sweeteners)

Businesses will not be able to register sweetened drinks with the FTA unless this lab report is submitted. If a business fails to provide the required report, the drink will automatically be classified as a high-sugar beverage until evidence proves otherwise.

Stockpiling and Transition Rules

The FTA will issue special transition rules for drinks held in stock during the period when the new model comes into effect. These rules will apply to businesses that expect their tax liability to increase or decrease once the new law is implemented. This is important for distributors and importers managing large stocks in UAE warehouses and free zones.

Why the UAE is Making this Change

The UAE has been taking active steps to reduce sugar consumption and lifestyle-related diseases. By linking tax levels to the actual sugar content of drinks, the government aims to encourage manufacturers to reformulate products and create healthier beverages with lower sugar content.

The FTA has stated that businesses will be given enough time to prepare and will be supported with guidance and public clarifications.

What this Means for Indian Manufacturers and Exporters

Many Indian companies export soft drinks, juices, concentrates and ready-to-drink beverages to the UAE. Under the new system, the sugar content of every product will directly determine its tax liability and final retail price.

Manufacturers producing high-sugar beverages may face higher taxes, making their products more expensive in the UAE market. As a result, some producers may reformulate products to reduce sugar levels for the Gulf market.

Indian exporters will also need to meet the UAE’s new lab-testing and certification requirements before shipping goods. This adds an additional step to export compliance and documentation.

Impact on Indian Consumers in the UAE

Indian residents in the UAE may see noticeable price differences among drink brands. Low-sugar and zero-sugar options may become more affordable compared to high-sugar drinks. Over time, the system is expected to shift consumer preferences toward healthier beverages.

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