Other BriefingsUAE to Roll Out Tiered Sugar Tax on Drinks from January 1, 2026: What Changes and Who’s Affected
The UAE sugar tax overhaul, set for 2026, replaces the flat 50 percent levy with a tiered, sugar-based system applied per litre. The reform aims to encourage healthier consumption, drive product reformulation, and align excise compliance across the beverage value chain.
The UAE will replace its flat 50 percent excise on sweetened beverages with a tiered, volumetric sugar tax from January 1, 2026, aligning rates with the amount of sugar per 100ml rather than a single ad-valorem percentage.
Authorities claim the shift is meant to nudge reformulation, steer consumers toward lower-sugar options, and standardize rules with updated GCC guidance.
How the tiered volumetric model works
Under the new mechanism, a drink’s excise due per litre will be tied to total sugar (natural + added + other sweeteners). Categories defined by the Federal Tax Authority (FTA) are:
- High sugar: ≥ 8g per 100ml
- Moderate sugar: ≥ 5g and < 8g per 100ml;
- Low sugar: < 5g per 100ml
- Artificially sweetened only: 0% excise (no added sugar/other sweeteners)
Cabinet will set the actual per-litre amounts for each tier; carbonated drinks cease to be a separate excise category and will be taxed strictly by sugar content.
Energy drinks remain at 100 percent excise under the existing rule.
Scope and exclusions
The tax will apply to ready-to-drink beverages, as well as concentrates, powders, gels, and extracts used to make drinks. Exemptions include 100 percent natural juices with no added sugar or sweeteners, milk, and approved medical or dietary beverages, according to the UAE’s FTA.
Compliance: What businesses must do
The FTA is urging producers, importers, and stockpilers to begin preparations now. Key steps include:
- Lab testing and certificates: Obtain an Accredited Conformity Certificate from the Ministry of Industry and Advanced Technology (MoIAT), based on testing by ENAS/ISO-IEC 17025-accredited laboratories, stating sugar/sweetener content. Products without a valid certificate will be treated as high-sugar until verified.
- (Re)registration: Register affected products as excise goods in the FTA system with supporting lab reports; the FTA has published a public clarification (EXTP012) and a dedicated guidance page.
- Transitional relief: The Ministry of Finance has proposed legislative amendments to allow partial deduction of previously paid 50 percent excise on inventory if the new tiered model lowers the liability when it takes effect (for unsold goods).
Cost impact across the value chain
Producers (manufacturers/bottlers)
- Reformulation costs: Companies will incur R&D, pilot testing, and ingredient re-sourcing expenses to move SKUs into lower sugar tiers. Packaging and labeling may also need updates to reflect reduced sugar content or sweetener substitutions.
- Certification and testing: Regular laboratory testing and MoIAT certification will be required to maintain compliance and conformity documentation.
- Pricing strategy: Beverages with sugar content of 8g/100ml or more will likely face the highest per-litre charges, putting pressure on profit margins and retail pricing. In contrast, drinks containing only artificial sweeteners will remain exempt (0 percent excise), incentivizing producers to expand “zero sugar” lines. (
Importers and distributors
Importers and distributors will face immediate operational adjustments as the new sugar tax framework takes effect. Existing beverage inventories will need to be reclassified according to their sugar content tiers, requiring updated documentation and coordination with suppliers. High-sugar products will pose elevated holding risks, as retailers are expected to rebalance their assortments toward low- and zero-sugar options. Transitional provisions, however, may help mitigate double-tax exposure for stock that has already been taxed under the previous regime.
In parallel, businesses will need to update their enterprise resource planning (ERP) and excise reporting systems. Each stock-keeping unit (SKU) must be recorded with its sugar content, certification status, and applicable tier-based rate to ensure compliance and accuracy in filings. These system upgrades are likely to require both technical adjustments and staff training to align with the FTA’s new reporting requirements.
Retailers (supermarkets, convenience, HORECA packaged sales)
- Certificate checks and listings: Ensure listed SKUs have valid MoIAT certificates; non-compliant drinks default to high-sugar for excise purposes. Expect planogram shifts toward low/zero-sugar segments.
- Shelf pricing: Tiered rates will create wider price ladders within categories; stores may adopt stronger promotional emphasis on low-sugar products as suppliers reposition price points.
Consumers
For consumers, the 2026 sugar tax reform will likely reshape beverage pricing and availability. High-sugar drinks are expected to become more expensive relative to low- and zero-sugar alternatives, reflecting the tiered tax structure. As producers adapt to the new system, the market will see an expansion of reformulated products positioned within lower sugar tiers, offering more budget-friendly choices to health-conscious buyers.
At the same time, shoppers can expect a clearer product landscape as beverage makers and retailers emphasize differentiation across sugar levels. The shelves will increasingly feature no-sugar and “zero” options, as producers aim to qualify for the 0 percent excise tier and align with evolving consumer preferences.
What’s not changing
Energy drinks will continue to be taxed at 100 percent of the excise price and will remain outside the volumetric sugar-based model.
The bottom line
The UAE’s 2026 sugar tax reform marks a significant shift: from a flat 50 percent levy to a differentiated, sugar-based charge applied per litre. In the near term, businesses will need to focus on compliance measures such as product testing, certification, and system updates, before turning to longer-term strategies like product reformulation and portfolio realignment.
For consumers, the change will likely bring clearer price variations across beverage categories and a wider range of low- and zero-sugar options. Interested parties are advised to keep a close eye on upcoming regulations and Cabinet decisions, which will set the final per-litre rates and implementation framework.
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