On July 18, 2025, the UAE Ministry of Finance and the Federal Tax Authority jointly announced an important change to how uae excise tax 2025 applies to sweetened beverages in the UAE for 2025. The announcement states that “the amount of tax will depend on the amount of sugar in each product, rather than being based solely on the product category. This is a change that will encourage lower sugar levels from producers” will come into force in early 2026. 

In this article, we discuss the implications of this policy change, provide an overview of the current excise tax structures, and explain what work remains to be done. Additionally, practical suggestions are provided to help businesses prepare for the impending changes.

Existing Framework

Under the current UAE tax regime, the Government taxes sugary beverages under relevant legal provisions.

First, Article 1 of the Federal Decree-Law No. 7 of 2017 on Excise Tax and its amendments defines “excise goods” as goods that are subject to supplied to tax by Cabinet Decision, which was recommended by the Minister.

Similarly, Article 2(1) of the same Decree-Law clarifies that the Decree-Law applies only to excise goods which are specified by a decision of the Cabinet recommended by the Minister.

Next, Article 3 of the Decree-Law states that “The Cabinet, on the suggestion of the Minister, may issue a decision setting the rates of tax imposed on excise goods and the method of calculating the excise price.

The Cabinet, on the suggestion of the Minister, may also limit the tax rate imposed to a maximum of 200% of the excise price of the good.”

How the UAE Excise Tax 2025 Impacts Sweetened Beverages

Furthermore, Article 2(6) of Cabinet Decision No. 52 of 2019 explicitly lists sweetened drinks as excise goods for Article 2 of the Decree-Law. In addition, Article 12 of the same Decision establishes the excise tax payable in respect of sweetened drinks at a rate of 50%, with no further differentiation.

Consequently, all sweetened drinks in the UAE are currently subject to a uniform excise tax liability of 50%, regardless of the sugar content of the drinks. In other words, beverages with insignificant amounts of added sugar are assigned the same excise tax liability as beverages with extremely high sugar content.

Therefore, a one-size-fits-all approach does not compel taxable persons to reduce the sugar content in their taxable products, as there is no tax incentive unless sugar is decreased to zero tax payable.

This demonstrates that while excise tax uae policies (especially in the context of Dubai tax law) apply uniformly to sweetened beverages, they do not distinguish according to sugar content.

Where Things Stand

The Ministry of Finance has provided some commentary on its official website, the most significant of which is summarized below: 

First, the new application method introduces a tier volumetric model, which ties the tax on each litre of a sugar-sweetened beverage to its sugar content per 100ml. That is, the more sugar contained per 100ml, the higher the tax per litre, all applicable UAE excise tax 2025. 

Secondly, the Ministry has stated that excise tax taxable persons must modify their internal systems, check their product formulations, and confirm that their records with the Federal Tax Authority align with the changes in the new model.

However, they have also reassured UAE businesses that they will be given adequate time to prepare for the rollout of this new mechanism, in accordance with the wider Dubai tax in the UAE. 

Lastly, these changes are intended to incentivize manufacturers to reduce levels of sugar, while also enabling those consumers to make better dietary choices within the new UAE excise tax 2025 formats and guidance.

UAE Excise Tax 2025: Business Considerations & Recommendations

The Ministry of Finance further stated that this announcement is in line with a proactive approach to give suppliers, importers, and other stakeholders sufficient time to prepare for the change.

Therefore, businesses subject to the excise tax regime should start preparing for the incoming tiered-based sugar tax regime right away and not wait for additional instructions or details on implementation. Preparation will be required in several areas, including:

• Upgrading internal systems and onboarding and collaborating appropriately with third-party software providers and digital tax solution providers to allow for implementation without delays;
• Reviewing internal processes for determining the sugar content of all sweetened beverage products;
• Documenting all relevant information and supporting documents to demonstrate sugar content levels to comply with anticipated compliance requirements; and
• Considering the cost-benefit implications of reducing sugar content, including the optimal amount of reduction, where applicable. 

Conclusion

In 2026, the UAE plans to change the excise tax on sweetened beverages from a flat tax to a tiered tax depending on the amount of sugar in the product.

The more sugar in the beverage, the larger the tax for that beverage. This change is to encourage manufacturers to lower sugar levels and help consumers choose healthier beverages. 

Businesses should start taking steps now to prepare by changing internal systems, checking the sugar content of products, verifying records, and assessing the costs of decreasing sugar. Taking action now to prepare for the change will allow for the transition to the UAE Excise Tax 2025 framework and compliance.

Khairallah Law Firm, one of the Best Lawyers in Dubai, can be a key ally and resource for guidance regarding these changes and other possible implications in the future.

Having said that, contact Khairallah Advocates & Legal Consultants and benefit from our free 30-min legal consultation.

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