UAE clarifies excise tax model for sweetened drinks

The Federal Tax Authority (FTA) has called on producers, importers and stockpilers of sugar-sweetened drinks to begin reviewing the sugar content in their products in preparation for the implementation of a new excise tax mechanism set to take effect at the beginning of 2026.

The new mechanism, to be introduced following the issuance of related legislation, will adopt a Tiered Volumetric Model that links the excise tax per litre of sweetened drinks to the sugar content per 100 millilitres.

The FTA noted that early preparation will ensure a smooth transition once the system is enforced, with producers and importers required to register sweetened drinks as excise goods by submitting certified laboratory reports from facilities accredited by the Ministry of Industry and Advanced Technology (MoIAT). These reports must detail the sugar and sweetener content of each product.

The Authority urged stakeholders to obtain UAE Certificates of Conformity from MoIAT regarding sugar and sweetener content, based on laboratory reports from accredited testing bodies such as the National Accreditation Department, the Emirates National Accreditation System or other ISO/IEC 17025-certified laboratories.

According to the FTA, once the new rules take effect, any sweetened drink without a valid UAE Certificate of Conformity will automatically be classified as a high-sugar beverage until laboratory verification confirms otherwise.

Comprehensive guidance on the mechanism and its application is available on the FTA website under Excise tax according to a tiered-volumetric model.

The Public Clarification issued by the FTA in September outlined key amendments to the excise tax framework, classifying sweetened drinks into four categories:

High-sugar drinks containing 8g or more of total sugar and sweeteners per 100ml. Moderate-sugar drinks containing 5g to less than 8g per 100ml.

Low-sugar drinks containing less than 5g per 100ml.

Drinks containing only artificial sweeteners.

Under the new model, excise tax will apply according to total sugar content - including natural, added and artificial sweeteners - with beverages containing only artificial sweeteners taxed at zero per cent.

The FTA confirmed that carbonated drinks will no longer form a separate excise category; instead, their tax rate will depend on sugar content. Energy drinks will remain subject to the current 100 per cent excise tax rate.

The Authority reiterated its commitment to granting businesses adequate time to adapt to the new framework by reviewing product compositions, updating registrations, and ensuring readiness ahead of implementation.

Meanwhile last week in a new step toward enhancing product quality and the accuracy of technical inspections, the Abu Dhabi Quality and Conformity Council (QCC) announced the signing of a Service Level Agreement with the Federal Tax Authority (FTA) to launch a specialised technical consultancy service for all manufacturers in the UAE, which will measure the actual natural loss of excise goods.

The agreement was signed by Khalid Ali Al Bustani, Director-General of the FTA, and Fahad Gharib Al Shamsi, Acting Secretary-General of the QCC, on the sidelines of 45th edition of GITEX Global 2025, being held at the Dubai World Trade Centre.

This initiative implements FTA Decision No. 6 of 2025 regarding the standards, controls, and procedures for handling natural loss within designated zones, resulting from the natural properties of excise goods.

Under this decision, the Central Testing Laboratory of QCC was accredited as the first independent technical entity authorised to conduct tests and technical examinations of excise goods.

The new “Actual Natural Loss Measurement Service for Excise Goods” aims to determine the rate of natural loss occurring during production, storage, or transportation – when the loss results from the nature of the goods themselves (e.g., evaporation). This is one of the key criteria required for exemption from tax obligations on excise goods that have become unfit for consumption due to their natural characteristics, within the designated zones registered with the FTA for excise tax purposes.

The service provides accurate, data-driven reports through sample collection, laboratory testing, and analysis of production, storage, and transport conditions – enhancing the reliability of data submitted to the FTA.

WAM