UAE's New Beverage Sugar Tax by 2026

New Sugar Content-Based Tax on Drinks from 2026

The United Arab Emirates is elevating public health reforms to a new level: from January 1, 2026, sweetened beverages will be taxed under an entirely new system. The change will not only affect manufacturers and importers but may also influence consumers' everyday decisions. Instead of the previous product category-based approach, the tax rate will now be determined based on the actual sugar content of the drinks. This step is part of a common initiative by the GCC countries aiming to introduce a unified, multi-tiered system for the taxation of sugary drinks.

What's Changing in 2026?

The current regulation imposes a 50% excise tax on all sugary drinks, irrespective of their sugar content. This approach is simple but fails to reflect the differences between products. The essence of the new regulation is to shift to a 'volumetric model' that takes into account the amount of sugar in each drink. In other words: the more sugar a drink contains, the higher its tax burden will be.

This type of differentiation appears fairer and may also encourage manufacturers to reduce the sugar content of their products or switch to alternative sweeteners.

What Does This Mean in Practice?

For manufacturers and importers, the new system will require more precise administration. Drinks will need to be tracked not just by product categories but also by sugar content. Players who have already paid the previous flat 50% tax on a product before 2026, and which falls under a lower tax rate in the new system, will have the opportunity to reclaim part of the previously paid tax if the product has not yet been sold.

This mechanism can be particularly important during end-of-year stock replenishment periods, when many manufacturers and distributors import or produce significant quantities in advance.

The Goal: A Healthier Society

UAE's Ministries of Health and Finance do not hide that the primary goal of the regulation is to reduce public health risks. Excessive sugar consumption is one of the main causes of type 2 diabetes, obesity, and other chronic diseases worldwide. Sweetened drinks are particularly problematic due to their hidden sugar content and tendency to cause a rapid rise in blood sugar levels without creating a feeling of fullness.

Therefore, the new taxation model seeks to act as a preventive measure. By making high-sugar-content drinks more expensive, consumers are more likely to choose lower-sugar or sugar-free alternatives.

Regional Cooperation at the GCC Level

The regulation is not an isolated measure but part of the collaboration among GCC countries. Several member states, including Saudi Arabia, Qatar, and Bahrain, have also moved in a similar direction in recent years. The aim is to create a unified and predictable tax environment for sugary drinks across the entire region.

Common regulation reduces the possibility of tax evasion and provides a stable basis for trade within the region. Exporting and importing companies can thus plan their business strategies more easily, as the tax burden becomes more predictable.

Impact on the Economy and Industry

For market players, the change presents a dual challenge. On one hand, it increases administrative burdens—new labeling rules, accurate sugar content analysis, and record-keeping obligations. On the other hand, it also creates opportunities: companies that respond in time and reduce the sugar content of their products can gain a competitive advantage.

Aside from the reduced tax burden, marketing products labeled as 'low sugar content' can be advantageous. Consumers are becoming more health-conscious and are often willing to pay more for healthier options—especially if tax rates support this.

Preparation for the 2026 Implementation

There is more than a year left until the regulation comes into effect, giving market players time to prepare. Key tasks include:

- Reviewing current product offerings by sugar content;

- Trialing alternative sweeteners and conducting consumer tests;

- Updating labels to comply with the regulations;

- Modifying internal record-keeping systems;

- Understanding the details of the new refund mechanism.

Consumers should also pay attention to the changes. Some favorite products may become more expensive, while others may drop in price. The new system can indirectly influence purchasing habits, steering the population towards healthier choices in the long term.

Summary

The UAE's new sugar tax regulation is not just a technical financial amendment, but a comprehensive health policy and economic step as well. Taxation based on sugar content is fairer, encourages the industry towards healthier products, and prompts consumers to make more conscious decisions.

From January 2026, not only will the ingredients of drinks change, but so too will the tax system behind them. The transitional period requires preparation from both companies and consumers—but in the long run, the entire society can benefit from it.

(Source: Based on an announcement by the Ministry of Finance of the United Arab Emirates.)