UAE Excise Tax 2026

UAE Excise Tax 2026 marks one of the most significant overhauls to the country’s indirect tax framework since excise duty was first introduced back in October 2017. With Cabinet Decision No. 197 of 2025 coming into force on 1 January 2026, the Federal Tax Authority (FTA) has fundamentally restructured how certain goods are classified, taxed, and regulated. Businesses that import, produce, or stockpile excise goods in the UAE can no longer rely on the old flat-rate model — the rules have changed, the product categories have evolved, and compliance expectations have risen considerably.

Understanding what has changed is not just a matter of regulatory awareness. For manufacturers, importers, retailers, and distributors operating across the UAE, it directly affects pricing strategies, product registration, supply chain operations, and monthly tax filings. This blog provides a clear and genuine overview of everything that has shifted in the UAE’s excise tax landscape in 2026.

The Foundation: What Is UAE Excise Tax 2026 and Why Does the UAE Levy It?

Before diving into the 2026 changes, it is worth grounding the discussion in the purpose of excise tax itself. Under Federal Decree-Law No. 7 of 2017, the UAE introduced excise tax as an indirect levy applied to specific categories of goods deemed harmful to public health or the environment. Unlike VAT, which applies broadly to most goods and services, excise tax targets a narrow set of products — primarily tobacco, energy drinks, electronic smoking devices, and sweetened beverages.

The government’s objective has always been twofold: to discourage the consumption of products linked to non-communicable diseases such as obesity, diabetes, and respiratory illness, and to generate additional public revenue that supports healthcare and social services. The 2026 amendments build on this foundation by making the tax structure more precise, more data-driven, and more aligned with actual health impact.

What Changed on 1 January 2026: The Core Reform

From Flat Rate to Tiered Volumetric Taxation for Sweetened Drinks

The single most consequential change that took effect on 1 January 2026 concerns sweetened beverages. Before this date, the UAE applied a uniform flat rate of 50% excise tax on all sweetened drinks under the ad-valorem model introduced in December 2019. Whether a beverage contained a small amount of added sugar or an extremely high concentration, it was taxed at the same rate, based on the product’s retail value rather than its actual sugar content.

Cabinet Decision No. 197 of 2025 abolished this flat-rate approach entirely and replaced it with a tiered volumetric model. Under the new system, the amount of excise tax payable per litre of a sweetened drink is now directly linked to the total quantity of sugar and sweeteners present in every 100 millilitres of the product. This is a fundamental philosophical shift; the tax is no longer based on price but on health impact as measured by sugar concentration.

The Four Categories of Sweetened Drinks in 2026

The FTA has officially classified sweetened drinks into four distinct tiers based on their sugar and sweetener content. High-sugar drinks, defined as beverages containing 8 grams or more of total sugar and sweeteners per 100ml, are taxed at AED 1.09 per litre. Moderate-sugar drinks, which contain between 5 grams and less than 8 grams per 100ml, attract an excise tax of AED 0.79 per litre. Low-sugar drinks containing less than 5 grams per 100ml are taxed at AED 0 per litre, effectively exempt from excise. Drinks that contain only artificial sweeteners and no added sugar also fall into the zero-rate category.

This tiered structure is designed with a dual purpose. It provides a financial incentive for manufacturers to reformulate their products with reduced sugar content, and it gives consumers a clearer price signal about the relative health impact of different beverages. A drink reformulated to fall below 5 grams of sugar per 100ml faces no excise obligation at all, making reformulation a commercially attractive option for producers.

What Counts as “Sugar” Under the New Rules

A critical element of the 2026 framework is how sugar content is calculated. The FTA has clarified that the total sugar count includes natural sugars present in raw ingredients, added sugars such as white sugar, brown sugar, glucose syrup, and honey, and artificial sweeteners or other sweetening agents. There is no distinction between “good” or “natural” sugar and “refined” sugar; if it sweetens the drink and it was added during the production process, it counts. This means functional drinks, flavoured waters, drinks marketed as “natural,” and products sweetened with date syrup, fruit concentrates, or honey are all captured under the new framework if their total sweetener content exceeds the threshold.

The End of the Carbonated Drinks Category

One of the most notable structural changes in 2026 is the complete removal of carbonated drinks as a standalone excise category. Under Cabinet Decision No. 52 of 2019, all carbonated drinks were taxed at a flat rate of 50% regardless of whether they contained sugar. Plain sparkling water was also caught under this framework, which many considered to be a disproportionate burden.

From 1 January 2026, carbonated drinks are no longer classified as a separate excise product type. Instead, they are assessed purely based on their sugar content within the sweetened drinks tiers. A plain carbonated water with no added sugar now attracts zero excise tax. A sweetened carbonated drink is taxed at either AED 0.79 or AED 1.09 per litre depending on how much sugar it contains. This is a meaningful and rational correction that aligns the tax burden with the health risk rather than the physical property of carbonation.

Products That Remain in Scope: Tobacco, Energy Drinks, and Vaping

While the sweetened drinks framework has been extensively reworked, the excise treatment of other major product categories remains robust and largely unchanged. Tobacco and tobacco products continue to attract a 100% excise rate on their retail or market value. This includes cigarettes, cigars, shisha tobacco, and any other smokeable tobacco form. Electronic smoking devices and tools, including e-cigarettes, vape pens, pod systems, and disposable vaping products, are also taxed at 100%, regardless of whether the liquids used in them contain nicotine or not. Even zero-nicotine e-liquids are subject to the full 100% excise rate, a point that many importers in the vaping sector have had to come to terms with. Energy drinks, which have been subject to 100% excise since the regime’s inception, continue to be taxed at that rate and are explicitly excluded from the sugar-tier framework applied to sweetened beverages.

Products Now Exempt: What Falls Outside the Scope

Alongside the structural changes, the 2026 framework provides clear guidance on products that do not attract excise tax. Unflavoured aerated water, essentially plain sparkling water with no added ingredients, is exempt. Beverages that are composed of at least 75% milk or milk substitutes are outside the scope of excise. One hundred percent natural fruit or vegetable juice with no added sugar or sweeteners is not taxable. Beverages prepared fresh in restaurants, cafes, or food outlets and served immediately in open containers for direct consumption are also excluded. These exemptions reflect a considered approach: the tax targets manufactured, packaged goods that contribute to habitual sugar consumption, not fresh or dairy-based beverages.

Compliance Obligations: What Businesses Must Do

The Emirates Conformity Certificate

One of the most operationally demanding new requirements under the 2026 framework is the mandatory Emirates Conformity Certificate for Sugar and Sweeteners Content in Beverages. All producers, importers, and stockpilers of sweetened drinks are required to obtain this certificate from the Ministry of Industry and Advanced Technology (MoIAT). It is issued following laboratory testing conducted by accredited laboratories listed on the official websites of the UAE’s national accreditation bodies. The certificate must then be submitted to the FTA when registering or updating beverage products on the Emara Tax digital tax services platform.

The FTA has implemented a strict enforcement mechanism around this requirement. If a business fails to submit a valid conformity certificate, the product is automatically classified under the highest-sugar tier, meaning AED 1.09 per litre applies by default until the actual sugar content is proven through certified lab results. This is not a bureaucratic formality — it has real and immediate financial consequences for businesses that delay obtaining their documentation.

Registration and Monthly Filing

Any business engaged in importing, producing, stockpiling, or releasing excise goods in the UAE is required to register with the FTA through the EmaraTax portal. There is no minimum turnover threshold for this obligation; even a single shipment of excise goods triggers the registration requirement. Registered businesses must submit excise tax returns monthly, by the 15th of the month following the tax period, and must maintain all relevant records for a minimum of five years. Late registration carries an administrative penalty, and non-compliance with return filing can result in further financial exposure, including retrospective tax liability and surcharges.

The Business Impact of the 2026 Changes

For businesses operating in the beverage, tobacco, or vaping sectors, the 2026 excise tax changes require a thorough internal review. Pricing models built on the old 50% flat rate are no longer valid. Supply chain teams need to understand how concentrates, syrups, powders, and gels are taxed under the new volumetric framework — importantly, tax on concentrates is calculated based on the volume of finished drink they produce, not the volume of the concentrate itself. A 750ml syrup that yields 7.5 litres of finished beverage is taxed on the full 7.5 litres, not the 750ml container.

Manufacturers who can demonstrate through certified lab evidence that their products fall below the 5 grams per 100ml threshold gain a significant commercial advantage; their products face zero excise, while competitors with higher-sugar formulations face a per-litre tax that compounds across large distribution volumes. The 2026 changes have thus created strong financial incentives for product reformulation, and the market is already beginning to see a broader range of low-sugar and reformulated beverages positioned to take advantage of the zero-rate tier.

About My Taxman

Navigating the UAE’s evolving excise tax landscape requires more than general awareness — it demands expert guidance tailored to your specific business model and product portfolio. My Taxman is a trusted UAE-based tax advisory firm that provides end-to-end support for businesses dealing with excise tax compliance, registration, and return filing. Whether you are an importer bringing sweetened beverages through UAE ports, a manufacturer reviewing your product formulations in light of the new sugar tiers, or a vaping distributor ensuring your FTA registrations are current, My Taxman brings the technical expertise and practical experience to keep your business compliant and penalty-free.

My Taxman assists clients with FTA excise tax registration on the EmaraTax platform, obtaining the Emirates Conformity Certificate for sugar content, structuring product classifications under the 2026 tiered model, preparing and submitting monthly excise returns, and managing FTA correspondence and audit responses. With Cabinet Decision No. 197 of 2025 now fully in force, the time to act is now. Contact My Taxman today at +971‑543223140 and ensure your business is fully aligned with UAE Excise Tax 2026 requirements.