UAE Targets Sugar in Soft Drinks with Tiered Excise Tax
Implementation begins in early 2026, with the Ministry of Finance and the Federal Tax Authority providing a transition window for suppliers and manufacturers. Businesses must update internal systems, review formulations, and register relevant data with the FTA to ensure compliance. A coordinated awareness campaign, developed alongside health and regulatory bodies, is expected to launch ahead of the deadline to facilitate the shift.
This policy aligns with the UAE’s broader health objectives, including obesity and diabetes reduction efforts. Authorities emphasise the new mechanism as an evidence-based fiscal tool designed to influence consumption habits and support sustainable development goals across the Gulf region.
Tax experts have welcomed the change, noting it not only serves public health interests but could also encourage manufacturers to reformulate products. Thomas Vanhee, founding partner at Aurifer Middle East Tax Consultancy and affiliate professor of tax law, described the move as a “win‑win”. He explained that manufacturers shifting to lower-sugar recipes may reduce tax liability, with potential cost savings passed on to consumers.
Under the existing framework, all carbonated and powdered sugar-added drinks face a 50% excise while energy drinks and tobacco products carry 100%. The new tiered system will differentiate tax according to sugar levels, although specific rate bands have not yet been published.
Stakeholders have commended the government’s proactive announcement ahead of enforcement. It provides both domestic and international manufacturers with a clear timeline and space to adjust recipe formulations and administrative practices—and potentially avoid sudden financial burdens in 2026.
Industry voices highlight the importance of transparency regarding the thresholds and respective levies. Observers warn that without clear guidelines, manufacturers may struggle to gauge the impact on retail prices or to calculate the commercial viability of sugar reduction efforts. Authorities have indicated further technical guidance will follow, assisting businesses in preparing systems, labelling standards, and account reporting processes.
The policy transformation reflects coordination between the Finance Ministry, FTA, and the Ministry of Health and Prevention, signifying an integrated legislative and health-focused strategy. It aligns with a global shift seen in comparable jurisdictions: graded sugar taxes have been implemented in nations such as the UK, Mexico and South Africa, where they registered measurable impacts on sugar consumption and product reformulation.
Health advocates underline that tiered taxes generate stronger behavioural signals than flat-rate systems. By penalising high-sugar products more severely, consumers are nudged towards lower‑sugar options, and manufacturers are incentivised to innovate. The UAE hopes to replicate these gains domestically.
Critics, however, caution that tiered taxation must be accompanied by robust monitoring and transparent tax bracket definitions. Without mechanisms to ensure compliance, the system’s fairness may be undermined. Additionally, attention must be paid to potential cost increases being passed onto consumers without accompanying public education or product labelling improvements.
Looking ahead, several metrics will determine success: a decline in average sugar levels in SSBs on the market, changes in consumption patterns and interest from manufacturers in reformulated products. The UAE’s next step is the publication of detailed regulations, anticipated over the coming months, which will clarify sugar thresholds, tax bands and compliance procedures.
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