Sohaibani & Partners

Thousands of beverage producers, importers, and distributors operating across the Emirates have long operated under a single blunt instrument: a flat 50% excise tax applied to the retail price of sweetened and carbonated drinks. Under the new tiered-volumetric model, that approach is gone and the exposure for businesses that have not adapted is real.What the Law Used to Say The UAE previously applied a fixed 50% excise tax on the excise price of sweetened and carbonated drinks, the ad valorem method. It drew no distinction between a diet drink sweetened entirely with aspartame and a beverage loaded with added sugar. Both sat in the same category, attracted the same rate, and gave manufacturers no fiscal incentive to reformulate. That bluntness was not a design feature. It was a gap the legislature has now closed. What Has ChangedCabinet Decision No. 99 of 2025, amending Decision No. 52 of 2019, introduced a tiered-volumetric model effective 1 January 2026. Excise tax on sweetened drinks is no longer calculated as a percentage of price. It is now determined by total sugar content per 100ml: • 8g or more per 100ml (high sugar) — AED 1.09 per litre • Between 5g and 8g per 100ml (medium sugar) — AED 0.97 per litre • Less than 5g per 100ml — no excise liability • Artificial sweeteners only (aspartame, sucralose, saccharin, stevia) — no excise liability Energy drinks remain unchanged at 100% ad valorem. What This Means for Your Business • Products without an accredited laboratory report are automatically classified as high-sugar and taxed at AED 1.09 per litre, the maximum rate • All products must be tested by an approved laboratory, certified by a notified body, and registered or updated in the FTA's brand sync portal • Where the new liability exceeds the old, transitional stockpiling rules apply and excise tax falls due on excess goods Why This Matters More Than It Might Seem This is fiscal law being used as a public health instrument and that is worth understanding, not just as context but as legal design. Governments have long used excise taxation to internalise the external costs of harmful consumption: tobacco, alcohol, and now sugar. The legal mechanism is the same in each case. By embedding the health outcome directly into the tax structure rather than leaving it to regulation or prohibition, the legislature creates a self-enforcing incentive. Manufacturers adjust formulations to reduce liability. Consumers face prices that reflect the true cost of the product. No ban is required. The tiered structure is deliberate: it prices sugar content directly, removes the equivalence between high sugar and zero-sugar products that the old flat rate created, and gives manufacturers a financial reason to reformulate. The obligation is not just to comply with a new rate; it is to understand how your product portfolio now sits within a framework that rewards lower sugar content and penalises inaction through automatic reclassification. Key Takeaways The flat 50% ad valorem tax on sweetened drinks is replaced by a per-litre rate tied to sugar content, effective 1 January 2026. The obligation to track retail sale prices is abolished. The science of the product, its actual sugar content, now determines the liability. Businesses must obtain accredited lab reports and update FTA product registrations accordingly. Failure to do so is not a neutral position: it defaults your entire product to the highest tax tier.DENIZ KOZAKCI SOHABANI, LL.M., Managing Partner [email protected] DILARA DOGAN Legal Consultant [email protected] If you have any questions or need further clarification regarding the matters discussed in this article, please do not hesitate to contact our Tax Department. Our team of experts is readily available to provide you with tailored advice and support to navigate these legal complexities. We look forward to assisting you in ensuring your business remains compliant and competitive in this evolving legal landscape.

Corporate authority, sponsorship and the limits of secondment: the structuring question that arises for groups entering the Kingdom through a UAE regional company.IN BRIEF Background Foreign groups expanding into the Gulf commonly establish a regional com pany in the UAE and enter Saudi Arabia through it. Where a joint venture is then formed in the Kingdom with a local partner, it is frequently proposed that the group’s UAE-based regional or country manager be appointed Gen eral Manager or Managing Director of the joint venture, reporting to the board and holding authority to sign and commit the company. The analysis applies wherever the employer sits outside the Kingdom. The question that follows is whether that individual must be employed dir ectly by the Saudi joint venture, or whether the existing UAE employment can be preserved and the individual seconded into the Kingdom. The answer engages Saudi corporate law, Saudi employment and immigration law, and the tax position in both jurisdictions. Those regimes do not give the same answer, CLIENT ALERT September 2026 Saudi law does not require the manager of a limited liability company to be an employee of that company. Authority to bind the company derives from the appointment and from the powers recorded on the Commercial Registration. That authority is nonetheless inoperable without an iqama, because the bank mandate, Absher, Nafath, Qiwa, GOSI, Muqeem and ZATCA all key off it. An iqama requires a Saudi sponsor, and therefore an employment relationship with the Saudi entity. A candidate appointed as General Manager need not resign from the UAE group company. The Saudi restriction on working for others is directed at work performed inside the Kingdom for another Saudi establishment, not at a foreign directorship. Secondment from a foreign employer is not an available route. There is no Saudi immigration category permitting it. The workable structure is direct employment by the JV, supported by a group assignment agreement. An unincorporated joint venture cannot sponsor anyone and should not be used where the for eign shareholder needs its own nominee in the General Manager role. [email protected] 1 / 3 SOHAIBANI & PARTNERS Appointing a General Manager to a Saudi Joint Venture and the distinction between them is the source of most of the difficulty encountered in practice. 02 03 04 05 Arrangements described as Corporate appointment does not require an employment relationship The Saudi Companies Law does not require the manager of a limited liability company to be an employee of the company. The manager’s authority to bind the company arises from the appointment itself and from the powers recor ded on the Commercial Registration. No employment relationship is needed for the appointment to be valid or for the recorded powers to be effective as a matter of corporate law. Operational capacity requires an iqama, and an iqama requires a sponsor The corporate position does not determine the practical one. The bank man date, Absher, Nafath, Qiwa, GOSI, Muqeem and ZATCA all operate by refer ence to the iqama. A General Manager without an iqama cannot transact through any of them. An iqama requires a Saudi sponsor. In practice this means an employer, a Qiwa employment contract, a work permit, GOSI registration, and salary paid by the Saudi entity through Mudad. Premium Residency is the single excep tion to the sponsorship requirement, but it confers no advantage once the individual is on the joint venture’s payroll. The practical conclusion is therefore the opposite of the strict legal one: although employment is not legally required for the appointment, the indi vidual must be employed by the joint venture in order to perform the role. The UAE role may be retained Resignation from the UAE group company is not required. The Saudi restric tion on working for others is directed at work performed inside the Kingdom for another Saudi establishment. It is not directed at a foreign directorship. The individual may hold both residencies and remain a director of the UAE company. Two exposures then require active management rather than tolerance: Conflicts of interest. The individual will sit on both sides of the relationship between the joint venture and one of its shareholders. This should be addressed by a standing partner authorisation together with related-party approval thresholds recorded in the articles of association and in the joint venture agreement. Permanent establishment. The individual’s UAE signing authority should pass to a person resident in the UAE, and the individual should not conclude UAE company business from inside the Kingdom. This step should be completed before relocation, not after. Secondment from a foreign employer is not available [email protected] 2 / 3 SOHAIBANI & PARTNERS Appointing a General Manager to a Saudi Joint Venture secondments do not create work authorisation. 06 07 There is no Saudi immigration route permitting a foreign employer to second staff into the Kingdom. The structure that does work is a dual one. The individual is employed by the joint venture for Saudi purposes. Behind that, a group assignment agreement between the UAE company and the joint venture addresses cost, continuity of service and return rights. Three limits apply to that agreement: 1. 2. 3. It cannot reduce the individual’s Saudi statutory entitlements. The Qiwa wage must be paid in full by the joint venture. If the UAE company pays the individual and recharges the cost, the joint venture’s payment to the UAE company attracts withholding tax and reverse-charge VAT. For that reason the joint venture should carry the salary directly. Unincorporated joint ventures An unincorporated joint venture has no legal personality, no Commercial Registration, and no capacity to sponsor. The individual would have to be employed by the local partner’s company or by another Saudi entity within the group, with authority conferred by power of attorney. That structure preserves the immigration constraint, weakens the authority position, and places control of the foreign shareholder’s own nominee in the hands of the local partner. Where the foreign shareholder requires its own nominee as General Manager, the joint venture should be incorporated as a limited liability company or a simplified joint stock company. Action points Before the appointee commences in role: Record the powers and their limits on the Commercial Registration. Establish dual bank signatories above an agreed threshold. Provide for removal of the General Manager as a reserved matter in the joint venture agreement, mirrored in the articles of association. Put indemnity arrangements and D&O cover in place. Personal exposure attaching to the registered manager does not cease on his ceasing to act. Complete the transfer of UAE signing authority before relocation. AUTHOR Deniz Kozakcı Partner · Sohaibani & Partners [email protected]