Starting January 1, 2026, the UAE will implement a sugar-based excise tax, replacing the current flat 50% rate with a tiered system that depends on the amount of sugar a drink contains. Announced by the UAE Ministry of Finance, this move aligns with GCC standards and supports the UAE’s goals of promoting public health, transparency, and taxation standards.
How the New Tax Works
Currently, all sweetened drinks, ranging from soft drinks to flavoured juices, are taxed at a 50% flat rate. From 2026 onward, the rate will depend on the amount of sugar per 100ml. The more sugar a drink has, the higher the tax rate will be.
Here is a simple breakdown of the new norms:
- High sugar (8g or more per 100ml) – Highest tax
- Medium sugar (5g to <8g per 100ml) – Moderate tax
- Low sugar (<5g per 100ml) – Lower tax
- Zero sugar – Minimal or no tax
Energy drinks will continue to face a 100% excise tax, while beverages made with natural sugars and without artificial sweeteners could be exempt.
Why the UAE Is Changing Its Policy
This new system is not just about collecting more taxes. It is about encouraging healthier choices and reducing sugar consumption with respect to public health. By linking the tax directly to sugar content, the government hopes to motivate companies to lower sugar levels in their products and help consumers make better decisions at the counters. It is part of a broader effort to reduce the risks of lifestyle diseases such as obesity and diabetes, while also building a more data-driven and transparent tax framework.
What Consumers Can Expect
For shoppers, prices on high sugar drinks will likely increase, while low and zero sugar options will become more affordable. Families who often buy sodas, juices, or energy drinks might see higher bills unless they switch to lighter options. Many beverage companies are also expected to reformulate recipes to stay competitive, so expect to see “reduced sugar” versions appearing more often.
What Businesses Should Do
For beverage producers, importers, and distributors, this change means planning ahead.
Businesses will need to:
- Test and verify sugar levels through accredited labs
- Re-register products under the new classification
- Update labels and packaging with accurate sugar details
- Adjust pricing, accounting, and reporting systems
Companies that already paid the 50% excise tax on unsold stock may be allowed to reclaim part of it if their liability decreases under the new model. While this directly impacts beverage makers, it also reflects a larger trend that the UAE’s tax system is becoming more precise, digital, and accountability-focused across all sectors.
The Big Picture
This update shows how the UAE’s tax environment is evolving and modernising. The country has already introduced corporate tax, improved VAT compliance, and refined excise policies, each step moving toward international best practices.
The sugar tax is another example of how the UAE is creating a healthier, fairer, and smarter economy. For businesses, this is a reminder that compliance is no longer just paperwork but a strategic part of doing business in a much more informed economy.
The Future
With the new tax taking effect on January 1, 2026, both businesses and consumers have time to prepare. It is an opportunity for households to make healthier choices, and for companies to upgrade their systems, improve accuracy, and stay ready for future reforms. This shift reinforces the UAE’s vision of connecting economic sustainability with social wellbeing, ensuring the tax system supports both public health and fiscal responsibility.
As the UAE continues to modernize its tax landscape, it is clear that policy changes like the sugar based tax are just the beginning of a more transparent and visionary approach. Businesses that take early action by reviewing compliance systems and strengthening internal controls will be better positioned to stay compliant and competitive in the years ahead.
At Tass & Hamjit, we help companies across the UAE navigate these changes with confidence. Our advisory team supports clients in understanding new regulations, preparing for upcoming tax models, and ensuring smooth compliance so your business stays relevant in a changing economy. Connect now.