New UAE Tax Rule: Less Sugar To Reduce Prices Of Sweetened Drinks, Says Expert

Incentivising manufacturers to reduce sugar levels in their products would not only encourage healthier dietary choices but would also benefit consumers with lower prices, a tax expert told Khaleej Times on Friday. This comes after the announcement by the Ministry of Finance (MoF) and Federal Tax Authority (FTA) to implement a selective tax on sugar-sweetened beverages (SSBs).

From early next year, the excise tax imposed on SSBs - including carbonated and energy drinks - will be based on their sugar content rather than their category, replacing the current fixed percentage-based rate.

Currently in the UAE, all carbonated drinks as well as powdered and concentrated drink mixes with added sugar or other sweeteners are levied 50 per cent excise tax. Energy drinks and all tobacco products, meanwhile, are charged 100 per cent.

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Both the MoF and FTA have yet to provide details on the percentage of excise tax on sweetened drinks, but Thomas Vanhee, founding partner at Aurifer Middle East Tax Consultancy, has already called the new scheme a win-win formula for the consumers.

“With the introduction of excise tax that was broadened in 2019 , the basis for the (excise tax) calculation has been the retail sales, which is the price at which the final consumer normally buys the product,” noted Vanhee, who is also an affiliate professor of tax law.

“This will be replaced in early 2026 with a system where, instead of looking at the retail sales price, we look specifically at the sugar content. This could indeed provide an incentive for companies to reduce the sugar content so that they can improve their margins, reduce the taxes, and therefore would be more beneficial for the consumers with retail prices being lowered,” Vanhee added.

“From the excise tax point of view,” Vanhee continued,“the importers or manufacturers are mainly going to be the ones that would benefit from the new tax scheme. But ultimately and hopefully they will pass on the savings to the consumers.

“Even the local restaurants or cafeterias will also benefit as they will be buying from the distributors or manufacturers.”

Vanhee observed:“The excise tax was initially meant to reduce the consumption of products which are considered harmful for health such as energy drinks, tobacco, and later on, sugary drinks were added. I believe the UAE now wants to accelerate the effects of this tax by a change in policy, hoping to further decrease consumption of sugar in drinks.”

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