According to the latest 2025 update, the UAE government has announced a significant change in the taxation of soft drinks containing sugar, effective January 1, 2026. This reform aims to enhance the efficiency of the excise tax system and align it with the new standards set by the Gulf Cooperation Council (GCC).
At present, all sugary beverages are subject to a flat 50% excise tax, irrespective of their sugar content. However, under the new framework, this uniform rate will be replaced by a tiered tax structure, where the applicable tax rate will vary based on the actual sugar content of the beverage.
New Methodology Explained
The new approach, approved by the GCC’s Financial and Economic Cooperation Committee, introduces a sugar-based calculation for excise tax on sweetened beverages. Under this system, the tax rate will be determined by the amount of sugar per 100 milliliters — with higher sugar concentrations resulting in higher tax rates for ready-to-drink beverages.
Sugar-Based Tax Categories
To implement this, beverages will be classified into distinct sugar-content categories, ensuring that drinks with lower sugar levels are taxed less, and those with higher levels face a steeper rate:
| Category | Sugar content per 100 ml | Expected Tax Treatment |
| High-Sugar Beverages | 8g or more | Highest tax band |
| Moderate-Sugar Beverages | 5g – 8g | Medium tax band |
| Low-Sugar Beverages | Less than 5g | Lower tax band |
| Artificially Sweetened (no added sugar) | 0g | 0% excise tax |
Key Highlights of the Update
An important point to note is that the Federal Tax Authority (FTA) has clarified that the revised excise rules will apply to all beverages containing added sugar or other sweeteners. This includes concentrates, powders, gels, and extracts that are used to prepare sweetened drinks.
However, beverages containing only naturally occurring sugars, with no added sweeteners, will remain exempt from the excise tax.
While the overall framework has been approved by the authorities, the exact tax rates for each sugar-content category have not yet been announced. These will be confirmed through a forthcoming Cabinet Decision.
In the meantime, businesses are advised to start preparing early — reviewing product labels, sugar disclosures, and internal compliance processes — to ensure a smooth transition once the final rates are released.
What local businesses should know?
This regulatory change will have a direct impact on manufacturers, importers, distributors, retailers, hospitality operators, and F&B brands operating in the UAE.
Below are the key considerations for both existing businesses and new entrants exploring opportunities in the UAE market:
- Assessing Sugar Content per Product
Businesses will need to determine the exact sugar content for every beverage they manufacture or sell. To ensure accuracy and compliance, the following steps are recommended:
- Conduct laboratory testing to verify sugar levels (grams per 100 ml)
- Maintain documentation supporting sugar classification
- Classify each product under the appropriate tax slab — high, medium, low, or zero sugar
This is particularly relevant for products such as:
- Energy drinks
- Packaged juices
- Ready-to-drink (RTD) teas and coffees
- Carbonated beverages
- Frozen drink mixes and syrups
- Sports drinks and flavored waters
- Label and Packaging Updates
Accurate sugar disclosure will be critical. Businesses must update product labels to clearly display sugar content and ensure consistency between label data and excise filings, in line with UAE consumer and food labeling requirements.
Brands should also plan packaging redesigns and inventory cycles well in advance to avoid compliance issues or excess non-compliant stock.
- Excise Registration and Reporting Compliance
Entities dealing with taxable beverages must ensure excise tax registration with the Federal Tax Authority (FTA) if not already registered. Ongoing compliance will require regular reporting and reconciliation of taxable quantities, sugar content, and corresponding tax slabs.
- Supply Chain and Inventory Planning
Importers, distributors, and wholesalers should review and align their systems and stock management processes. Key actions include:
- Monitor existing inventory to avoid obsolete packaging stock.
- Updating product codes, pricing records, and tax classifications in ERP systems.
- Coordinating with suppliers to obtain accurate and updated sugar data.
- Marketing and Consumer Communication
As pricing structures evolve, transparent communication will be essential to maintain consumer trust and brand reputation. Businesses can strengthen their positioning by:
- Communicating the benefits of reformulated or compliant products.
- Highlighting low-sugar or no-sugar SKUs.
- Running awareness campaigns focused on health and regulatory compliance.
Companies offering healthier options are likely to gain a competitive edge in the market.
Conclusion
The UAE’s move toward a sugar-based excise tax represents a significant regulatory shift designed to encourage healthier consumption choices. With implementation scheduled for January 1, 2026, businesses should begin preparing now — from assessing sugar content and updating product labels to reviewing pricing models and tax compliance systems.
At Mercurius, we help organizations stay ahead of regulatory changes through comprehensive advisory and compliance support.
To ensure your business is ready for this transition, contact our experts today.
Source: Gulf News 2025