Introduction

The UAE has announced a major reform to the excise tax framework on sweetened drinks, transitioning from a flat-rate system to a tiered volumetric excise tax model. Effective 1 January 2026, excise tax on sweetened beverages will be calculated based on sugar content per 100 ml, with tax applied per litre rather than as a percentage of retail price.

This reform aligns the UAE with international best practices and directly links tax liability to sugar concentration, encouraging product reformulation and healthier consumer choices.

Legal & Regulatory Framework

The revised excise structure is issued under:

• Federal Decree-Law No. 7 of 2017 on Excise Tax (as amended)

• UAE Cabinet Decisions on Sweetened Drinks (Tiered Volumetric Model)

• Federal Tax Authority (FTA) Executive Regulations and Public Clarifications

All manufacturers, importers, and stockpilers of sweetened drinks in the UAE must align their product classification, labeling, and excise reporting with this updated framework.

What Is a Sweetened Drink Under the New Rules?

A sweetened drink includes any beverage that contains:

• Added sugar (sucrose, fructose, glucose, etc.)

• Sweeteners or sugar substitutes

• Concentrates, powders, or syrups intended to be reconstituted into drinks

This covers carbonated drinks, energy drinks, ready-to-drink juices, sweetened teas and coffees, and flavoured beverages. Certain exclusions may apply, subject to Cabinet Decision definitions and FTA guidance.

Tiered Excise Tax Structure – Sugar Content Based

Under the new model, excise tax is applied per litre based on sugar concentration per 100 ml.

Official Sugar Slabs & Excise Rates

300 ml Practical Examples Under Tiered Excise Model

Since excise tax is levied per litre, the tax applicable to a 300 ml (0.3 litre) bottle is calculated proportionately.

Calculation basis:
Excise per litre × 0.3

Excise Impact on 300 ml Sweetened Drinks

Note: AED 0.79 × 0.3 = AED 0.237 (rounded to AED 0.24); AED 1.09 × 0.3 = AED 0.327 (rounded to AED 0.33).

Key Compliance Requirements for Businesses

To comply with the tiered excise tax regime, businesses must ensure:

• Accurate nutritional labeling reflecting sugar per 100 ml

• Supporting laboratory analysis or formulation data

• Correct product registration on the FTA excise system

• Updated pricing models and ERP excise calculations

• Proper excise return filing based on volume released for consumption

Errors in sugar disclosure or classification may result in reassessments, penalties, and tax audits.

Business Impact & Strategic Considerations

The tiered model significantly impacts:

• Beverage pricing and margins

• Product reformulation strategies

• Import cost structures

• Inventory and stockpiling decisions before 1 January 2026

Early planning is critical, particularly for FMCG groups with large beverage portfolios.

How ARJ Chartered Accountants Can Support You

ARJ Chartered Accountants provides specialized excise advisory services, including:

• Product-by-product excise impact assessments

• Sugar slab classification and documentation review

• ERP and excise system alignment

• FTA registrations, returns, and audit support

• Advisory on reformulation and excise optimization

We help clients remain fully compliant while strategically managing excise exposure.

Conclusion

The UAE’s shift to a tiered excise tax on sweetened drinks marks a fundamental change in how excise is calculated and reported. Businesses must act now to assess sugar content, pricing, and compliance readiness ahead of 2026.

For expert guidance on UAE excise tax, ARJ Chartered Accountants remains your trusted advisor.

Disclaimer: This article is for general informational purposes only and does not constitute tax or legal advice. Excise treatment is subject to Cabinet Decisions and FTA guidance. Professional advice should be obtained for specific circumstances.