The UAE will impose a new tax on beverages based on sugar levels in January 2026. Follow the tax conditions.
The UAE is set to implement revisions to its sugar and sweetened beverage excise tax system starting from January 1, 2026. Here’s an overview of the upcoming changes, how the system will operate, and the reasons behind this policy update.
Starting January 1, 2026, the United Arab Emirates will revise its approach to taxing soft drinks. Instead of applying a flat 50% tax, beverages will be taxed according to their sugar content. Consequently, the cost of items like the cola you purchase, kids' juice from the supermarket, or energy drinks at the gym could either go up or down, depending on how much sugar they contain. This initiative aims to promote healthier, low-sugar food choices and aligns the UAE with the updated Gulf model.
What’s changing from January 1, 2026:
1. Transition to a tiered or volumetric taxation model:
The current flat excise rate of 50% applied uniformly to most sweetened beverages will be replaced by a tier-based system. Under this model, the tax will vary depending on the sugar content per 100 ml. Drinks with higher sugar levels will attract steeper tax rates.
2. Classification by sugar content:
Beverages will now fall into categories based on their sugar or sweetener levels per 100 ml:
- High sugar: Equal to or above 8 g/100 ml.
- Moderate sugar: Between 5 g and less than 8 g/100 ml.
- Low sugar: Less than 5 g/100 ml.
- Artificially sweetened beverages (with no added sugars or other sweeteners): Taxed at 0%.
3. What constitutes sugar or sweeteners:
“Sugar content” includes both natural and added sugars, alongside other sweeteners. Artificial sweeteners (e.g., sucralose, aspartame, stevia) are exempt and do not contribute to taxation. Drinks utilizing exclusively artificial sweeteners without added sugars qualify for the zero-rate category.
4. Exemptions:
Certain drink types fall outside the scope of the tax or receive special treatment:
- Pure fruit/vegetable juices with no added sugars or sweeteners.
- Milk, dairy products, and derivatives.
- Baby formula and related products.
- Beverages designed for dietary or medical purposes.
- Drinks prepared for personal and non-commercial use.
- Open or unsealed drinks served in establishments like restaurants.
5. Energy drinks retain unchanged taxation:
Energy drinks will continue to be taxed at the existing rate of 100%, unaffected by this reform.
6. Compliance requirements for manufacturers/importers:
Stakeholders must provide UAE-accredited lab reports detailing sugar content and the type of sweeteners for each beverage classification. Failure to submit lab reports will result in products being automatically classified under the high-sugar category.
7. Handling transitional stock:
Provisions exist for products already under the old flat-rate system before 2026. Adjustments might be possible if the new tax rate is lower, allowing deductions for previously paid excise taxes.
Reasons for implementation:
The primary goal is to encourage reduced consumption of sugary products and enhance public health by addressing issues such as obesity and diabetes. Additionally, this aligns with GCC-wide excise policy frameworks while motivating manufacturers to reformulate products with lower sugar levels or opt for artificial sweeteners.
This change marks a significant shift aimed at promoting healthier lifestyles across the UAE, offering manufacturers an incentive to develop alternatives with reduced sugar content.
Practical tips for consumers and small store owners:
Check the labels: Look for grams of sugar per 100 ml, and low-sugar options are likely to be cheaper under the new system.
Comparing similar products: Sugar-free or artificially sweetened versions may offer better value.
Buy smart: If your favorite drink is going up a level, watch for promotions before January 1, 2026 - as retailers sometimes clear out inventory before tax changes.
For small stores: Contact suppliers now about future prices, and plan to add new labels to your products or update prices at points of sale.
Companies must ensure the readiness of product registrations and laboratory certificates.