Love your sugary treats? Your favourite drinks and snacks might soon cost a little more! The Ministry of Finance and Federal Tax Authority (FTA) have recently announced they’re doubling down on their health-focused tax policies with an expanded Sugar Tax – cause even sweets aren’t escaping the country’s push for healthier living. The new Excise Tax on sugary products will come into effect in early 2026, widening the scope of the existing tax that has been in place since 2017. The new regulation extends to more high-sugar items, with rates expected to align with regional health strategies. So, before you stock up on your favourite fizzy drinks, here’s what you need to know.
What Is The UAE Sugar Tax
The FTA has announced an expanded Sugar Tax set to take effect in early 2026, marking a significant escalation in the nation’s health-focused policies. Currently, the UAE imposes a 50% Excise Tax on sugary drinks and a wider range of sugary products. The new tiered excise tax on sugary drinks will be based on the sugar content per 100 ml, rather than a flat rate for all drinks. This means the more sugar a drink contains, the higher the tax will be. The new tax is aimed to be replaced in early 2026 with a system where, instead of looking at the retail sales price, they look specifically at the sugar content. This provides an incentive and ample time for companies to reduce the sugar content so that they can improve their margins, reduce the taxes, and therefore be more beneficial for the consumers, with retail prices being lowered.
Items Subject To The Tax
Under the existing excise tax of 2017, the following goods that use sugar are subject to the tax:
1. Carbonated Drinks: Covers all aerated beverages and any concentrates, powders, gels, or extracts intended for making such drinks, excluding unflavoured aerated water.
2. Energy Drinks: Applies to beverages marketed as energy drinks with stimulants like caffeine, taurine, ginseng, and guarana. This also includes similar substances and any concentrates, powders, gels, or extracts for energy drinks.
3. Sweetened Drinks: This includes any beverage with added sugar or sweeteners, including:
- Ready-to-drink beverages
- Concentrates, powders, gels, or extracts for making sweetened drinks
- Sources of sugar like white, brown, and powdered sugar, glucose syrup
- Sweeteners such as saccharin, aspartame, sorbitol, and neotame
Exemptions from Sweetened Drink Tax:
Under the existing excise tax of 2017, the following goods that use sugar are exempted from the tax:
- Beverages containing at least 75% milk or milk substitutes
- Baby formula and baby food
- Foods for special medical or dietary needs
- Alcoholic beverages
Who Needs To Pay This Tax And How
The UAE’s expanded Sugar Tax isn’t just a consumer concern; it directly impacts businesses involved with sweetened beverages. Registration for Excise Tax is compulsory for any company that imports, produces, stores, or distributes these products. They must register with the Federal Tax Authority (FTA).
1. Does your business need to register
The UAE’s sugar tax has specific registration rules that don’t apply to all businesses in the supply chain. Here’s how to determine if your company needs to register:
Should Register
If a business is involved in any of the following activities related to sweetened beverages, it must register:
- Importing sweetened beverages into the UAE from international suppliers.
- Manufacturing or producing sweetened beverages locally.
- Distributing or storing excise-taxed beverages before sale.
Should Not Register
Retailers selling sweetened beverages do not need to register for excise tax unless they also import, manufacture, or store these products in bulk. However, they must ensure that suppliers have already paid excise tax to avoid penalties.
2. Documents Required
To ensure a smooth application process, businesses should prepare:
- A valid trade license that includes activities related to importing, manufacturing, or distributing excise goods.
- Company ownership documents, including Emirates ID and passport copies of owners or authorised signatories.
- A detailed description of business activities, explaining how the company deals with sweetened beverages.
- Information on warehouse locations if the business stores excise goods.
- Customs registration details are required for businesses that import excise goods into the UAE.
- Financial records or projected revenue if requested by the FTA to assess tax liability.
3. Register Online
All excise tax registration is completed through the FTA’s e-Services portal. Businesses must create an account, log in, and complete the excise tax registration form. Before submitting, businesses should double-check that all documents are uploaded correctly and that all details match their trade license and company records. Errors in registration details can cause:
- Delays in tax registration approval.
- Inability to file excise tax returns properly.
- Compliance risks if business activities do not match the registered details.
4. Receive Your TRN
Once the FTA processes the application, businesses will receive a Tax Registration Number (TRN), which is required for all future excise tax filings, invoices, and payments. After receiving it, businesses must:
- Update accounting systems to reflect excise tax obligations.
- Ensure excise tax is calculated and paid before importing or distributing sweetened beverages.
- Start filing monthly excise tax returns as per the FTA’s requirements.
5. Set Up A Compliance + Tax Reporting System
Once registered, businesses must actively manage excise tax reporting to stay compliant with FTA regulations. Most businesses register successfully but fail to track their tax obligations properly, leading to late filings, underpayment errors, and compliance risks.
To ensure full compliance:
- Establish a tax filing schedule to avoid missing monthly excise tax deadlines.
- Implement FTA-compliant accounting software to automate excise tax calculations.
- Maintain detailed stock and sales records to ensure accurate tax reporting.
- Assign a dedicated tax compliance officer to manage excise tax filings and payments.
6. Monitor Changes In Tax Regulations
To remain compliant, businesses should:
- Regularly check the FTA website and official announcements for excise tax updates.
- Subscribe to FTA newsletters or attend tax workshops to stay informed.
- Work with tax consultants to review compliance processes and adjust to new regulations.
7. Rectify Errors In Registration
If a business made a mistake during excise tax registration, such as incorrectly classifying products or providing incomplete documentation, it must correct the issue before tax filings begin.
Registration errors can cause:
- Inability to file accurate tax returns.
- FTA penalties for incorrect tax reporting.
- Compliance risks that may lead to FTA audits or financial penalties.
Purpose Of This Tax
The Sugar Tax isn’t just about generating revenue – it’s a strategic policy designed to address multiple national priorities. Here’s a breakdown of the key reasons behind its implementation:
Public Health Protection
- Targets harmful products like tobacco, energy drinks, and sugary beverages to discourage excessive consumption.
- Aims to reduce lifestyle-related diseases (diabetes, obesity, heart conditions) linked to these goods.
Environmental Sustainability
- Covers products that contribute to pollution, such as electronic smoking devices and non-recyclable materials.
- Encourages eco-friendly alternatives by making damaging products more expensive.
Regulatory Control & Transparency
- Establishes a legal framework for tracking and taxing harmful goods.
- Requires businesses to register and file returns, ensuring compliance.
Consumer Awareness & Behavioural Change
- Higher prices act as a deterrent, steering consumers toward healthier choices.
- Reinforces the true cost of unhealthy or environmentally damaging products.
Ultimately, this tax aims to curb excessive sugar consumption while funding public health initiatives. Making the bitter pill of higher prices easier to swallow for a healthier UAE.
A Step Towards Healthier UAE
The Sugar Tax is a proactive step toward reshaping public health. The long-term benefits of this are reduced diabetes rates, lower healthcare costs, and a cultural shift toward healthier choices, which could far outweigh the initial drawbacks.
So next time you reach for that soda, ask yourself: Is the sugar rush worth the extra dirhams – and the health cost?
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