UAE Sugar Tax 2026: New Tiered Excise Rates & Compliance Guide
The taxation framework in the UAE is undergoing a strategic evolution, shifting from blanket taxation to a more complex and health-aligned framework. With effect from January 1, 2026, the UAE implemented a revolutionary Tiered Volumetric Sugar Tax on beverages. Under this new regime, governed by Cabinet Decision No. 197 of 2025, the tax liability on sweetened drinks is directly linked to the sugar content of the products, replacing the previous flat 50% excise tax on sweetened drinks.
This is a major shift in how the products are being classified, how the prices are determined, and how they are brought to market. This cannot be considered as just a change in tax rate for manufacturers, importers and retailers. Understanding the complexity of this tiered system is crucial for maintaining profitability and ensuring full compliance with the Federal Tax Authority (FTA).
From Flat Rate to Tiered Precision: The 2026 Shift
Since the introduction of excise tax in 2017, the UAE has followed a uniform 50% "ad-valorem" tax on all sugar-sweetened beverages, regardless of whether they contained a teaspoon of sugar or ten. Starting in 2026, this system is being abolished in favour of a volumetric model, meaning tax is charged as a fixed amount per litre based on the concentration of sugar (grams per 100ml).
The New 2026 Tax Tiers:
The government has established four different classifications for beverages based on their total sugar and sweetener content:
1. High-Sugar Tier (≥ 8g per 100ml): Drinks having high sugar concentrations will face the highest tax rate of AED 1.09 per litre. This category mainly covers normal full-sugar sodas, sweetened energy drinks and fruit drinks with high sugar content.
2. Moderate-Sugar Tier (5g to < 8g per 100ml): These kinds of beverages attract a reduced rate of AED 0.79 per litre. This tier is designed to encourage manufacturers to reformulate products to fall below the 8g threshold.
3. Low-Sugar Tier (< 5g per 100ml): To encourage the consumption of healthier alternatives, drinks in this category are subject to a 0% excise rate (AED 0 per litre).
4. Artificially Sweetened (Zero Sugar): Beverages that contain only non-nutritive sweeteners (like aspartame or stevia) and no added sugar will also taxed at 0%. However, these products must still be registered with the FTA.
Scope and Exclusions: What Is (and Isn’t) Taxed?
The new Sugar Tax of 2026 applies to any product that contains “ added sugar or other sweeteners “ (including honey, maple syrup and agave). This law also covers beverages which are ready to drink as well as concentrates, powders, gels and extracts which is intended to be mixed with water.
Important Exemptions:
· 100% Natural Juices: Fresh juices or bottled ones with no added sugar or other sweeteners are exempt from this new tax regime, regardless of their natural sugar levels.
· Milk and Dairy-Based Drinks: This exemption applies to beverages having at least 75% milk content or any other milk substitutes.
· Medical and Special Dietary Drinks: Specifically formulated products for medical use or special dietary requirements, like baby formula, are exempt.
· Energy Drinks: This tiered model excludes energy drinks, and the same will continue to fall under the previous tax regime of 100% flat excise tax on the retail price.
Compliance Roadmap: The "Conformity Certificate" Requirement
One of the most crucial updates for this new tax regime is the mandatory requirement for an Emirates Conformity Certificate for Sugar and Sweeteners Content. If you lack this certificate, FTA will categorise your product as High-Sugar Tier (AED 1.09/L) by default, irrespective of its actual sugar content.
Steps for Businesses:
1. Laboratory Testing: Every beverage SKU should be tested in a UAE-accredited laboratory (ISO-IEC 17025 accredited) to determine the sugar levels in each g/100ml.
2. MoIAT Certification: Along with the results of laboratory tests, businesses should apply for the conformity certificate via the Ministry of Industry and Advanced Technology (MoIAT) website.
3. EmaraTax Update: Once you have this certificate, it must be updated on the EmaraTax portal to ensure the correct tax treatment on imports and production.
Impact on the Supply Chain and Retail Pricing
The new move to a content-based model will create a "price ladder" in the beverage industry. For example, a 330ml soda can having high-sugar content may actually see a slight reduction in excise tax compared to the previous model of flat 50% retail price, while low-sugar products will become significantly more affordable.
· For Manufacturers: They need a massive financial incentive to reformulate the products. Reducing sugar content from 8.5g to 4.9g per 100ml enables them to move a product from a tax of AED 1.09 per litre to zero.
· For Retailers: Management of inventory became more complex under the new regime. Retailers need to recategorise the stock in hand and potentially re-label shelves to reflect the new price criteria.
· Transitional Relief: This is introduced by the Ministry of Finance to prevent double taxation during the transitional process. Under this mechanism, the businesses can deduct a portion of 50% exercise tax already paid on the unsold stock if the new tax rate is lower.
How Flyingcolour Tax Consultant Can Help?
Proper technical and financial analysis is required for understanding the transition from a flat-tax rate to a content-based tier system. At Flyingcolour Tax Consultant, we will help you to ensure your beverage business is ready to go with the 2026 regime.
Our Sugar Tax Advisory Services include:
· Product Portfolio Analysis: We will make a detailed analysis of your current SKUs to determine the applicable tax tier under the new tax regime and identify the requirement for reformulation.
· Certification Management: We support you on the end-to-end process from laboratory testing of your products to obtaining the MoIAT Conformity Certificates.
· Excise Registration & Emara Tax Support: We will assist on updating your certificate and product details with the Emara Tax portal to ensure correct filing and thereby prevent default categorisation as "High Sugar Tier” products.
· Inventory Transition Strategy: We will assist in calculating potential tax adjustments for unsold stock and help you to claim back any excess tax paid under the old flat 50% excise tax regime.
· Pricing & Margin Modelling: Our expert financial advisors assist you in evaluating and reworking your profit margins and retail pricing strategies to get maximum benefits under the new tax regime.
Frequently Asked Questions (FAQs)
1 How is the 2026 sugar tax different from the previous excise tax system?
Previously, the UAE imposed a flat 50% excise tax on the retail price of all sweetened beverages, irrespective of their actual sugar content. With this new tax regime of 2026, the tax is directly linked to the actual sugar content of the beverages. This results in a high tax rate for the drinks with high sugar content compared to drinks with moderate sugar, while drinks with low-sugar or artificially sweetened drinks will fall under zero excise tax.
2 What are the specific tax tiers and sugar thresholds for 2026?
The new tax regime, governed by Cabinet Decision No. 197 of 2025, categorises beverages into four tiers based on it’s sugar content (including natural, added and artificial sweeteners):
High-Sugar Tier (≥ 8 g per 100 ml): Taxed at AED 1.09 per litre
Moderate-Sugar (5g to < 8g per 100ml): Taxed at AED 0.79 per litre.
Low-Sugar (< 5g per 100ml): Taxed at 0%
Artificially Sweetened Only: Taxed at 0%
3 Do 100% natural fruit juices and milk drinks fall under the new tiered tax?
No. There are specific exemptions under the new rule of 2026 on beverages aiming for health and nutrition. 100% natural fruit and vegetable juices with no added sugar or other sweeteners remain exempt from the purview of tax, even if their natural sugar content exceeds the prescribed level. Similarly, beverages containing at least 75% milk or milk substitutes, baby formulas and medical or dietary drinks are also excluded from this sugar tax.
4 What is the "Emirates Conformity Certificate," and why is it mandatory?
Under the new rule of 2026, it is mandated by the Federal Tax Authority on all producers and importers to obtain an Emirates Conformity Certificate for Sugar and Sweeteners Content in their products to prevent businesses from underreporting the sugar content on the same. This certificate will be issued by the Ministry of Industry and Advanced Technology (MoIAT) based on test results from accredited laboratories. If you fail to update this certificate with FTA, they will automatically classify your product under the High-Sugar Tier by default
5 Can I claim a refund for stock already taxed under the old 50% rate?
Yes, there is one transitional relief mechanism under the new rule. If you have any unsold stock in custody on January 1, 2026, on which you already paid excise tax at 50% and that product now falls under a lower tax tier or is exempt, then you are eligible to claim a partial deduction or refund. But this process requires accurate inventory records and a valid lab report proving the sugar content of the products.
To learn more about UAE to Introduce Sugar Tax for Beverages from 2026, book a free consultation with one of the Flyingcolour team advisors.
Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.