Key Aspects of the Upcoming Transition to a Tiered-Volumetric Model of Excise Tax for Sweetened Drinks

Effective Date: January 1, 2026

What’s Changing?

The UAE is replacing the existing fixed rate of 50% Excise Tax on the Excise Price of Excise Goods (i.e., ad valorem method) for sweetened and Carbonated Drinks.

Under the new rule, a tiered volumetric model will be implemented to calculate the excise tax on sweetened drinks, based on the total amount of sugar or other sweeteners content per 100 ml volume of the drink.

The goal is to promote public health and encourage the development/ production of lower-sugar products.

Revised Category of the Products are:

• Category A – Natural juices (100% fruit, no additives)
• Category B – Any sweetened beverages (most common category)
• Category C – Only natural sweeteners (stevia, honey, etc.)
• Category D – Only artificial sweeteners (diet/zero sugar products)
• Category E – Concentrates/powders with sub-categories (E1-E4)
• Category F – Other convertible products (tablets, drops, crystals)

What’s Not Taxed? (Key Exclusions)

The following products are EXCLUDED from the definition of Sweetened Drinks and are NOT subject to this new tax:

• 100% Natural Juices: Beverages made entirely of natural juices (e.g., orange, apple) with no added sugar or sweeteners, even if their natural sugar content is high.
• Milk-Based Drinks: Beverages containing at least 75% milk or 75% plant-based milk alternatives.
• Infant Formula: Includes baby food, infant formula, and follow-up formula.
• Special Needs Drinks: Beverages for special dietary needs (GSO 654) or medical uses (GSO 1366).
• Restaurant/Personal Drinks: Drinks prepared in a restaurant and served in an open container, or drinks prepared by individuals for personal use.

What about Energy Drinks? No change. They remain subject to the 100% ad-valorem tax.

Table Below Populates the Proposed Excise Tax Basis the Sugar Content (low, moderate or high).

This is the new “per-litre” tax rate based on the total sugar content (natural, added, and other sweeteners) per 100ml.

Specific Sweetener Lists:

• Natural sweeteners: stevia, erythritol, honey, maple syrup, agave, etc.
• Artificial sweeteners: aspartame, sucralose, acesulfame K, saccharin, etc.

MBG Analysis

Let us understand what this change in calculating the Excise Tax would mean in different scenarios.

When packaging is in litre per bottle

When the packaging is in 500 ml per bottle

It is essential to note that the previous requirement to register and update the RSP regularly will be abolished. Under the new regime, excise duty will be set regardless of RSP.

Combinations Examples:

1. 2g Natural Sugar+3g Added Sugar = Total Sugar Content 5g= Moderate Sugar = Excise Tax @ AED .79 / Liter
2. 5g Natural Sugar 1g of Artificial Sugar = Total Sugar content 5g= No Sugar = Excise Tax @ Zero AED/ Liter
3. 2g Natural Sugar + 3g Added Sugar + 2g Artificial Sugar = Total Sugar Content 5g = Excise Tax @ AED .79/ Liter.

Transitional Provisions:

As new tax rules take effect, transitional provisions will play a critical role in how businesses manage existing inventory.

• Stock held before implementation may face different tax treatment.
• If the tax liability increases under the new model, the Excise Goods stockpiling rules will apply, and Excise Tax will be due on the excess Excise Goods.
• However, if the tax liability on such goods decreases, the amended Excise Tax Decree-Law provides that the deductible tax includes the Excise Tax paid on Excise Goods that have not been sold, and for which the tax liability has decreased. The deduction shall be equal to the reduction in the tax rate or amount.

These changes bring significant implications for pricing strategy, cash-flow planning, and inventory management—especially for distributors and importers operating across multi-country supply chains.

!! IMPORTANT: What Businesses MUST Do ?

1. Assess the ingredients of the products to get the right tests and classifications
2. Apply to accredited labs to get the products lab reports
3. Submit the lab reports to the notified bodies for certifications
4. Submit the certificate to FTA
5. Update the product registration details to effect in brand sync portal
6. System testing to populate right taxation basis the revised category of the products
7. Assess the stock piling requirements to avoid additional taxation and penalty

⚠️ CRITICAL WARNING

If you fail to provide an accredited laboratory report for your product. In that case it will be AUTOMATICALLY CLASSIFIED AS A “HIGH-SUGAR” DRINK and taxed at the highest rate of 1.09 AED/Litre.

Test Required

TEST REQUIREMENTS BY BEVERAGE CATEGORY

Category A: Natural Juices (Free from Added Sugars/Sweeteners)

Required Tests:

1. HPLC – High Performance Liquid Chromatography

• Purpose: Identify and measure sugar concentrations
• Measures: Natural sugars present in the juice
• Output: Quantitative analysis in g/100ml

2. IRMS – Isotope Ratio Mass Spectrometry

• Purpose: Distinguish the source of sugar (natural vs. added)
• Technology: Analyzes carbon isotope ratios (C-13/C-12)
• Critical: Confirms no external sugar has been added
• This is the KEY test for natural juice verification

3. Artificial Sweetener Testing

• Purpose: Confirm complete absence of artificial sweeteners
• Tests for: Aspartame, sucralose, acesulfame K, saccharin, etc.
• Result: Must show ZERO artificial sweeteners

Approved Laboratories (ONLY 2):

• Abu Dhabi Quality and Conformity Council (ADQCC)
• SGS Gulf Limited – MultiLab

Category B, C, D: Beverages with Added Sugars/Sweeteners

Required Tests:

1. HPLC – High Performance Liquid Chromatography
   1. Purpose: Identify and quantify sugar concentrations
   2. Measures: Total sugar content and types
   3. Output: Precise measurement in g/100ml with decimal precision
   4. Example: 2.95 g/100ml
2. Artificial Sweetener Testing
   1. Purpose: Detect and quantify artificial sweeteners

Approved Laboratories:

• Any ISO/IEC 17025 accredited laboratory (13+ options available)

Category E: Concentrates, Powders, Gels, Extracts

Special Requirement:

• Product MUST be diluted according to label instructions BEFORE testing
• Test the prepared/reconstituted beverage, not the concentrate

Required Tests:

• Same as Categories B, C, or D (depending on final beverage composition)
• HPLC + Artificial Sweetener Testing

Why Only MBG??

The new 2026 tiered-volumetric tax model introduces significant operational and compliance challenges. Failing to properly classify products or provide accredited lab reports will result in the highest tax rate and potential penalties.

Ensure your business is fully prepared. Our Expert tax professionals at MBG Consultancy are here to provide you the right guidance on:

• Stock Piling Advisory, Audit and Certification
• Product Classification & Analysis
• Navigating Lab Certification Requirements
• Updating FTA Product Registrations
• Impact Assessment & Compliance Strategy

To ensure a seamless transition and protect your bottom line, contact our experts at MBG Consultancy today for a consultation.