The Federal Tax Authority (FTA) has announced that businesses must complete Corporate Tax registration within 90 days from the Date of Incorporation / MOA.
For years, every sweetened drink in the UAE was subject to a flat 50% excise tax. That era officially ends on January 1, 2026.
Under Cabinet Decision No. 197 of 2025, the government has introduced a new Tiered Volumetric Model, fundamentally reshaping how sweetened beverages are taxed. This reform commonly referred to as UAE Excise Tax 2026 moves away from a percentage-based system to a sugar-content-driven structure.
The goal is clear: align fiscal policy with public health objectives under national long-term development strategies and encourage manufacturers to reformulate products with lower sugar content. In practical terms, the Sweetened Beverage Tax UAE framework now directly rewards low-sugar innovation.
For businesses, however, this is more than a policy update. It affects pricing, stock valuation, ERP systems, compliance documentation, and EmaraTax registration 2026 reporting processes.
Let’s break it down.
Breaking Down the 2026 Tiers
Under the new Tiered Volumetric Model, tax is no longer calculated as a flat percentage. Instead, it is imposed per litre based on sugar concentration.
Here is a simplified overview:
| Sugar Content (per 100ml) | Excise Rate (Per Litre) | Practical Impact |
| ≥ 8g | AED 1.09 | Standard sodas, sweetened teas |
| 5g to < 8g | AED 0.79 | “Reduced sugar” drinks |
| < 5g | 0% | Incentivized low-sugar beverages |
| Artificial sweeteners only | 0% | Zero-sugar/diet drinks |
This means the sugar content tax rate now directly determines excise liability.
The higher the sugar concentration, the higher the tax per litre.
The Invisible Impact: Concentrates, Powders & Gels
Here’s where many businesses may face unexpected exposure.
The tax does not apply merely to the liquid inside a ready-to-drink bottle. It applies to the total Ready-to-Drink (RTD) volume created after dilution.
How the Formula Works
For concentrates, syrups, or powders, tax is calculated on the total beverage volume produced after preparation.
For example:
- A 1kg powder that produces 10 litres of high-sugar beverage
- Tax applies to all 10 litres not just the powder weight
If dilution instructions are missing, the Federal Tax Authority applies a default high-concentration formula:
Total sugar grams × 20
This often results in classification under the highest tier (AED 1.09 per litre), significantly increasing tax exposure.
This is one of the most critical compliance risks under UAE Excise Tax 2026.
Compliance Checklist: The Emirates Conformity Certificate
The MoIAT Requirement
To determine the correct sugar tier, businesses must obtain an Accredited Conformity Certificate from the
Ministry of Industry and Advanced Technology (MoIAT).
Without proper certification, the tax authority assumes the highest sugar category.
The “Default” Trap
If a product is registered without valid laboratory certification:
- The FTA automatically applies the High-Sugar Tier (AED 1.09/L)
- This remains in effect until verified otherwise
That means inaccurate or incomplete documentation can immediately increase tax liability.
Lab Testing Standards
Only ISO-IEC 17025-accredited laboratories are accepted. Examples include:
- SGS
- National Laboratories and Research Center
Using non-accredited labs can invalidate classification.
Strategic Business Implications
This reform is not just about tax rates — it reshapes business strategy.
1. Pricing Strategy
Interestingly, some premium high-sugar beverages may see limited impact if pricing already absorbed higher margins.
However, low-cost, high-sugar beverages could experience sharper retail price increases.
Manufacturers may now actively reformulate products to move into lower tiers or eliminate excise entirely.
2. Inventory & Stockpiling
What about stock held on December 31, 2025?
A Transitional Relief mechanism (January–June 2026) allows businesses to deduct excess tax paid if the new rate is lower for unsold stock.
This means inventory planning before year-end becomes critical.
3. ERP & System Updates
Businesses must update ERP systems to include:
- Sugar content per 100ml
- Tier classification
- RTD conversion ratios
Failure to update SKU data fields could result in incorrect filings in EmaraTax registration 2026 reporting.
Exemptions: What Stays Tax-Free?
Not all beverages fall under the tiered excise regime.
The following remain exempt:
100% Natural Juices
No added sugar = No excise tax (even if natural sugar levels are high).
Milk-Based Drinks
Must contain at least 75% milk or milk substitutes.
Other Exemptions
- Baby formula
- Medical or dietary beverages
- Drinks prepared in restaurants (open containers)
Proper classification is essential to avoid misreporting.
Regional Perspective: Why This Matters Beyond the UAE
Although this reform specifically affects the UAE market, it signals a broader GCC trend toward health-focused tax reform.
Businesses operating regionally should evaluate alignment with:
Cross-border operators must ensure consistent product classification and tax treatment across jurisdictions.
Conclusion
The introduction of the Tiered Volumetric Model under Cabinet Decision No. 197 of 2025 marks one of the most significant shifts in UAE excise policy.
The era of the flat 50% tax is over.
Under UAE Excise Tax 2026, tax liability now depends directly on sugar concentration — incentivizing reformulation and increasing compliance complexity.
From product testing and certification to ERP updates and transitional relief claims, businesses must prepare well before January 1, 2026.
If your company manufactures, imports, distributes, or retails sweetened beverages, early action is critical.
The tax specialists at Reyson Badger provide expert guidance on:
- Excise classification
- Sugar content validation
- EmaraTax registration 2026 compliance
- Cross-border tax structuring
- Regional advisory, including Tax Services in Saudi Arabia
Contact Reyson Badger today to ensure your business is fully prepared for the Sugar Shift.
