Federal Tax Authority Unveils New Tiered Volumetric Model For Excise Tax On Sweetened Drinks Effective 2026

The Federal Tax Authority (FTA) has urged producers, importers, and stockpilers of sugar-sweetened beverages to start assessing the sugar levels in their products. This is in preparation for a new excise tax system set to be implemented at the start of 2026. The upcoming mechanism will use a Tiered Volumetric Model, linking the excise tax per litre of sweetened drinks to the sugar content per 100 millilitres.

Early preparation is crucial for a seamless transition when the system is enforced. Producers and importers must register sweetened drinks as excise goods by submitting certified laboratory reports from facilities accredited by the Ministry of Industry and Advanced Technology (MoIAT). These reports should detail each product's sugar and sweetener content.

The FTA's Public Clarification issued in September outlined significant amendments to the excise tax framework. Sweetened drinks are now classified into four categories: high-sugar drinks with 8g or more of total sugar and sweeteners per 100ml, moderate-sugar drinks with 5g to less than 8g per 100ml, low-sugar drinks with less than 5g per 100ml, and drinks containing only artificial sweeteners.

The new model will apply excise tax based on total sugar content, including natural, added, and artificial sweeteners. Beverages with only artificial sweeteners will be taxed at zero percent. Carbonated drinks will no longer have a separate excise category; their tax rate will depend on sugar content. Energy drinks will continue to be subject to the current 100 percent excise tax rate.

The FTA emphasized that stakeholders should obtain UAE Certificates of Conformity from MoIAT concerning sugar and sweetener content. This should be based on laboratory reports from accredited testing bodies like the National Accreditation Department, the Emirates National Accreditation System, or other ISO/IEC 17025-certified laboratories.

Once the new rules are in place, any sweetened drink without a valid UAE Certificate of Conformity will automatically be classified as a high-sugar beverage until laboratory verification confirms otherwise. Comprehensive guidance on this mechanism is available on the FTA website under Excise tax according to a tiered-volumetric model.

Ensuring Business Readiness

The Authority reiterated its commitment to providing businesses with sufficient time to adapt to the new framework. This involves reviewing product compositions, updating registrations, and ensuring readiness before implementation. The FTA aims to facilitate a smooth transition for all stakeholders involved.

With inputs from WAM