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What the tiered sugary drink tax means for F&B

The “Sugar Tax” in the UAE just got a lot more sophisticated. As of January 1, 2026, the Federal Tax Authority (FTA) officially retired the flat 50% excise tax on sweetened beverages, replacing it with a Tiered Volumetric Model.

For years, F&B founders viewed excise tax as a simple mathematical percentage of the retail price. In 2026, the game has changed: the tax is no longer about how much you charge for a drink, but exactly how many grams of sugar are inside the bottle. This shift under Cabinet Decision No. 197 of 2025 is designed to punish high-sugar formulations while rewarding those who pivot to healthier alternatives.

1. The 2026 Rate Card: Tax by the Gram

The new system is binary: more sugar equals a higher tax per liter. Pricing is now disconnected from tax liability. A premium organic soda and a budget-brand cola are taxed exactly the same if their sugar content matches.

Sugar Tier Content (Total Sugar per 100ml) 2026 Excise Rate
High Sugar 8g or more AED 1.09 per litre
Moderate Sugar 5g to 7.99g AED 0.79 per litre
Low Sugar Less than 5g AED 0 (Exempt)
Artificial Only Artificial sweeteners only AED 0 (Exempt)

Crucial Exception: Energy Drinks are not part of this tiered model. They remain subject to a flat 100% excise tax on their retail price, regardless of sugar content.

2. The Mandatory “Conformity Certificate”

In 2026, you cannot simply guess your sugar content. The FTA now requires every producer, importer, and stockpiler to obtain an Emirates Conformity Certificate for Sugar and Sweeteners.

  • The Process: You must send your product to a MoIAT-accredited laboratory (such as SGS or the National Laboratory Services Centre).

  • The Penalty for No Certificate: If you fail to submit this certificate via the EmaraTax portal, your product is automatically classified as “High Sugar” and taxed at the maximum rate of AED 1.09 per liter, even if it’s actually sugar-free.

3. How it Hits Different F&B Segments

For Retailers & Groceries: The Price Inversion

Under the old 50% rule, a cheap AED 2 soda paid AED 1 in tax. Under the new volumetric rule, that same 1-liter high-sugar soda pays AED 1.09.

  • Low-Cost Brands: These will see the sharpest price hikes, as the tax now makes up a much larger percentage of their total cost.

  • Premium Brands: Conversely, expensive high-end juices (that used to pay massive tax because of their high price) may actually see a price decrease, as the volumetric tax is often lower than the previous 50% ad-valorem levy.

For Cafes & Restaurants: The “On-Premise” Loophole

The 2026 tax primarily targets Ready-to-Drink (RTD) packaged products and concentrates/syrups.

  • The Good News: Drinks prepared fresh at the counter, like a latte with syrup or a fresh lemonade made on-site, remain generally excluded from this specific excise tax.

  • The Warning: If you sell “House-Made” bottled juices that are pre-packaged and displayed in a chiller, you are considered a “Producer” and must comply with lab testing and registration.

For Manufacturers: The Reformulation Race

The gap between AED 0.79 and AED 0 is the difference between a profitable SKU and a failing one. Many UAE-based beverage makers are spending 2026 reformulating their recipes to hit the 4.9g per 100ml sweet spot to avoid tax entirely.

4. Calculating Tax for Concentrates & Powders

One of the most complex parts of the 2026 audit is how it treats syrups and powders used in soda fountains or cocktail bars.

  • The Formula: Tax is calculated based on the final consumable volume, not the size of the syrup bottle.

  • The Math: If a 1-liter bottle of syrup makes 6 liters of high-sugar soda when diluted, you owe tax on 6 liters (6 x AED 1.09), not 1.

5. Transitional Relief: Don’t Double Pay

The Ministry of Finance has introduced a relief mechanism for 2026. If you are holding stock that was already taxed at 50% in 2025, but would be taxed lower under the new 2026 tiered model (e.g., a low-sugar premium drink), you may be eligible to deduct or refund the difference, provided the goods remain unsold and properly documented.

6. Compliance Checklist for 2026

To stay on the right side of the FTA this year, every F&B founder should:

  1. Map the Portfolio: Identify every beverage SKU and its exact sugar content.

  2. Update ERP Systems: Ensure your accounting software calculates excise by volume (liters) rather than price.

  3. Secure Lab Reports: Don’t wait; accredited labs are currently facing high demand.

  4. Review Contracts: Ensure your importers are providing the mandatory Conformity Certificates, or the tax burden will fall on you as the retailer.

The FounderX Advantage: Navigating the New Tax Landscape

At FounderX, we specialize in more than just company formation; we help you navigate the “Regulatory 2.0” era of the UAE. From ensuring your F&B trade license has the correct manufacturing activities to connecting you with tax-deduction consultants, we ensure your margins aren’t eroded by the new sugar levies.

Whether you’re launching a new functional beverage or scaling a restaurant chain, we make sure your tax strategy is as refined as your menu.