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.