In a strategic step toward promoting healthier lifestyles and reducing sugar consumption, the United Arab Emirates has announced a significant revision to its taxation policy for sweetened beverages. Starting in 2026, the excise tax on these products will no longer follow a fixed rate. Instead, it will be determined by the sugar content in each product.
The announcement, made by the Ministry of Finance and the Federal Tax Authority on Friday, July 18, 2025, introduces a sugar-based tax model designed to encourage both consumers and manufacturers to adopt healthier habits.
What’s Changing?
Currently, the UAE imposes a flat 50% excise tax on all sweetened beverages, regardless of how much sugar they contain. This includes drinks with added sugars and artificial sweeteners.
With the new rule taking effect in 2026, the tax rate will be determined by the actual sugar content in each beverage. Drinks with higher sugar concentrations will incur higher taxes, while lower-sugar options could benefit from reduced rates or exemptions.
This change shifts the focus from product categorization to actual nutritional value, creating a direct incentive for manufacturers to reformulate products with reduced sugar levels.
Why This Change Matters
This move places the UAE among a growing group of countries implementing sugar-based tax policies. The goal is to reduce public health issues associated with high sugar intake, including obesity, type 2 diabetes, and cardiovascular disease.
By targeting beverages—one of the most common sources of excess sugar—the government is:
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Promoting healthier dietary habits
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Encouraging product reformulation within the beverage industry
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Making low-sugar and sugar-free beverages more affordable and attractive to consumers
This initiative supports the UAE’s broader public health agenda and aims to curb non-communicable diseases while lowering healthcare costs over time.
Impact on Manufacturers
The Ministry of Finance has confirmed that this early announcement allows the food and beverage industry sufficient time to:
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Reformulate existing products to reduce sugar content
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Adjust supply chains and production processes
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Review and update nutritional labeling
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Rework pricing strategies in light of anticipated tax rates
This change also encourages innovation, as companies that produce healthier options will likely gain market advantage under the new rules.
Products Affected by the New Tax Structure
Products that will be subject to the sugar-content-based excise tax include:
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Flavored and carbonated soft drinks
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Fruit drinks with added sugar
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Sports and energy drinks
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Sweetened iced teas and coffees
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Any beverage containing added caloric or non-caloric sweeteners
Natural beverages with no added sugars or artificial sweeteners, such as 100% fruit juice or plain bottled water, may be excluded from taxation, depending on the final framework announced by the authorities.
Excise Tax in the UAE: A Quick Overview
Excise tax in the UAE was first introduced in 2017 as a way to discourage consumption of products deemed harmful to health or the environment.
Current tax rates include:
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50% on carbonated drinks
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100% on tobacco products
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100% on energy drinks
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100% on electronic smoking devices and liquids
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50% on sweetened beverages
From 2026 onward, sweetened beverages will no longer fall under the fixed 50% tax but will instead be taxed based on sugar content. The exact tax brackets have yet to be published.
How This Affects Consumers
The revised tax policy will directly affect product pricing and consumer behavior. Here’s what residents can expect:
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Healthier drinks may become more affordable due to lower tax rates
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High-sugar drinks will become more expensive, discouraging excessive consumption
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Product labels are likely to include clearer sugar content information
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A wider variety of low-sugar or sugar-free options will become available
These outcomes aim to empower consumers to make more informed dietary decisions and ultimately reduce sugar-related health risks.
Broader Public Health Impact
The UAE’s proactive approach aligns with global health recommendations from organizations like the World Health Organization (WHO), which advocates limiting daily sugar intake to reduce the risk of chronic diseases.
By regulating sugar through fiscal policy, the government reinforces other health initiatives such as:
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Abu Dhabi’s recent ban on junk food in schools
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The Department of Education and Knowledge’s nutrition policy promoting sustainable and nutritious food in education settings
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Nationwide awareness campaigns around obesity and diabetes prevention
Education and Awareness Initiatives
The Federal Tax Authority has stated that it will launch a series of awareness campaigns in advance of the 2026 rollout. These campaigns will:
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Educate manufacturers and retailers on compliance and reporting
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Inform consumers of the new tax structure
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Provide resources and tools to help stakeholders prepare for the change
This ensures transparency and smooth implementation while supporting public understanding of the policy’s health-driven purpose.
Expert Opinions
Public health experts and economists have applauded the initiative. According to nutritionist Dr. Rania Al Hammadi:
“This move highlights the UAE’s serious commitment to tackling chronic disease through preventive measures. It directly targets one of the largest sources of hidden sugar in our diets—packaged beverages.”
Market analysts also expect that the new policy could lead to product innovation, market differentiation, and increased demand for naturally sweetened or sugar-free drinks.
International Comparisons
The UAE’s new approach mirrors successful policies in other countries, including:
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United Kingdom: Introduced a tiered sugar tax in 2018, which led to widespread reformulation and a 44% drop in average sugar content in soft drinks.
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Mexico: Sugar tax implemented in 2014 contributed to a 12% reduction in sugary drink consumption.
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South Africa: Applied a health promotion levy, leading to reduced purchases of high-sugar beverages.
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Philippines: Increased prices of sweetened drinks and lowered sugar consumption among vulnerable populations.
These cases suggest the UAE’s policy could bring about meaningful changes in both industry practices and consumer behavior.
Timeline for Implementation
While the exact implementation date in 2026 is yet to be finalized, stakeholders are encouraged to begin preparations now. The one-year lead time is intended to ensure a smooth transition for all parties involved.
Conclusion
The decision to base the excise tax on sugar levels rather than product category marks a significant evolution in the UAE’s approach to public health and fiscal policy.
By aligning tax policy with actual health impact, the government not only incentivizes healthier choices but also encourages innovation in the beverage industry. This change is expected to have wide-reaching effects, including:
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Improved public health outcomes
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Increased market availability of low-sugar beverages
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Enhanced consumer awareness and choice
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Long-term cost savings for the healthcare system
As the 2026 rollout approaches, the UAE continues to demonstrate leadership in proactive, health-oriented governance.
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