UAE to implement tiered tax model on sugary drinks from 2026

The UAE Ministry of Finance (MoF) has announced the completion of a set of proposed legislative amendments to embed the updated excise tax policy into the national legislation, in alignment with the GCC’s adoption of a tiered volumetric model for excise tax on sugar-sweetened beverages (SSBs).

The amendments aim to establish a comprehensive legal and regulatory foundation that ensures the smooth implementation of the updated policy at the national level, with effect from 1st January 2026.

The ministry noted that the proposed amendments are designed to foster a competitive tax environment by introducing a legislative framework that enables effective and integrated implementation of the new model, while it also takes into account the implications that may arise during the transitional period.

The amendments include setting the various levels of a tiered volumetric model based on sugar content or other sweeteners for sweetened beverages, and introducing a clear mechanism that enables taxable persons who have imported or produced goods subject to a 50 per cent excise tax prior to the amendments coming into effect, and whose tax liability decreased as a result of these amendments (before selling the goods for which tax was previously paid), to deduct part of the previously paid tax.

A photograph shows sugary drinks at a supermarket.

The ministry affirmed that the amendments reflect the UAE’s commitment to updating its financial system through a flexible and proactive approach that supports economic stability, strengthens trust with taxpayers, and contributes to achieving the country’s fiscal and public health sustainability objectives.

The Ministry of Finance stated that this enhanced model reflects the UAE’s commitment to adopting flexible financial and legislative tools that promote healthy lifestyles. Unlike the previous model, which was based on product classification, the new system ties the tax rate directly to the level of sugar content, and by extension, to the associated health impact.

This approach incentivises manufacturers to reduce sugar levels and empowers consumers to make more informed dietary choices.

This direction also supports efforts to strengthen Gulf-wide tax policy integration and reinforces the use of taxation as a strategic tool to advance sustainable development goals.

The Ministry confirmed that comprehensive awareness campaigns will be launched—jointly with the Federal Tax Authority and relevant health and regulatory entities—to ensure a smooth transition and full readiness across the business ecosystem once the legislative tool is in place.

Notably, the system was developed in close coordination with the Ministry of Health and Prevention to ensure alignment with national health objectives and to deliver measurable improvements in dietary consumption patterns.

Businesses across the UAE will be granted sufficient time to prepare for the implementation of the new mechanism. Additional details will be announced in the coming period to support businesses in achieving full compliance with the updated policy.