Dubai: The Emirati government is encouraging local producers of sugary drinks to lower the sugar content in their products to secure the benefits of a flexible scheme, directly impacting the excise tax they need to pay. The FTA announced that instead of a single tax system, a separate tax system will be implemented on all sugar-sweetened beverages from 2026.
Under this rule, the tax on sugary beverages will be according to their sugar content. The announcement to apply a selective tax on sugar-sweetened beverages (SSBs) was made by the FTA and the MoF. This removes the uniform tax structure that has been established for all carbonated and energy drinks since 2017 and was also applied to sweetened drinks in 2019.
A tax expert on July 18 said that this move will not only encourage manufacturers to offer healthier dietary choices by lowering sugar levels in their products but also benefit consumers with reduced prices of sweetened drinks.
New Tax Relief for Healthier Beverage Options in UAE
Finexpertiza UAE’s Managing Partner, Atik Munshi, said that currently, all carbonated and sugary drinks are taxed at 50%, while 100% excise rates are applied for tobacco and energy drinks. He added that the sugar content in every drink is variable; therefore, the newly announced tax method would be beneficial for both businesses and consumers, as products with natural and less sugar content will experience relief on tax and cost.
Redseer Consulting’s partner, Sandeep Ganediwalla, said that the Emirati residents are shifting towards healthier choices, and such government policies are further promoting these choices. He added that many other markets, like the UK, have already implemented such taxes and have observed a 40% reduction in sugar content in sugary drinks. This kind of progressive policy shift could easily inspire the best startup story around low-sugar beverage innovation in the UAE market.
Sip Smarter: UAE’s New Policy Rewards Low-Sugar Drinks
Neither the FTA nor the MoF has yet released any details regarding the excise tax rates based on the percentage of sugar content in sweetened drinks, but Aurifer Middle East Tax’s founding partner, Thomas Vanhee, called this UAE sweet drink tax policy a win-win formula for the consumers. Moreover, Vahee, who is also an affiliate professor of tax law, added that the tax policy that was broadened in 2019 was calculated based on the retail price, the price a customer usually pays at a store.
However, with the new healthy drink policy that will be implemented in 2026, the excise rates will be calculated based on the sugar content. This could motivate local drink producers to lower sugar content in their products to secure more tax benefits and better profit margins. So, Vanhee added that this UAE sugar tax policy will not only help consumers access healthier drink options but also help them buy them at reduced retail prices. Speaking more about it, Vanhee told that if we consider the excise benefits of this reformed policy, the importers and producers of sugary drinks are mainly going to benefit from this new low-sugar beverage tax policy. But eventually and hopefully, the consumers will also save from reduced retail prices of low-sugar beverages.
Moreover, the local cafes and restaurants buying beverages from manufacturers or distributors will also benefit from the sweetened drinks tax reduction policy. Vanhee added that reforms in the excise tax structure were initially meant to reduce the consumption of harmful products for health, like energy drinks and tobacco, and later on, sugary drinks were added. He said he thinks that the UAE now wants to increase the effects of this change in the tax policy, with the hope that consumption of sugary drinks will reduce even more in 2026 and onwards.
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