UAE Excise Tax: What It Covers and What It Costs

On 1 January 2026 the UAE stopped taxing fizzy drinks for being fizzy and started taxing them for
being sweet. A sugar-free cola went from carrying 50% excise to carrying none at all. A high-sugar juice
that was previously taxed as a percentage of its price is now taxed by the litre.

It is the largest change to UAE excise tax since the regime began — and as this is
published, the government’s own public information page still describes the old rules.

Start with what is no longer true

Cabinet Decision No. 197 of 2025, issued on 27 November 2025 and in force from 1 January 2026,
repealed Cabinet Decision 52 of 2019 outright. Three widely repeated statements died with it.

“Carbonated drinks are taxed at 50%.” Carbonated drinks are no longer an excise
category at all. Article 2 lists exactly five excise goods and carbonation is not among them.
Carbonation is now irrelevant to tax; only sugar content matters.

“Sweetened drinks are taxed at 50%.” Replaced by a tiered volumetric model — an
amount per litre, not a percentage of price.

“The expansion to sweetened drinks and vapes happened on 1 January 2020.” It was
1 December 2019, per the Federal Tax Authority’s own five-year retrospective. The
January 2020 date is near-universal in secondary content and is simply wrong.

What is taxed now, and at what rate

Three mechanics matter for anyone importing or producing. For concentrates, powders, gels and
extracts, sugar is measured on the final prepared product per the producer’s guidelines.
Naturally occurring sugar counts toward the threshold where the drink also contains added sugar or
sweeteners — so a juice with sugar added is assessed on the total. And rounding runs to four decimal
places at registration, to the nearest fils on returns.

The government’s own page has not caught up

This is not a rhetorical point. We checked it.

As fetched on 20 August 2026 — nearly eight months after the change — the UAE Government portal’s
excise tax page still lists “Carbonated drinks (excluding sparkling water)” as an excise good, still
states “50 per cent on carbonated drinks” and “50 per cent on any product with added sugar or other
sweeteners”, and still cites Cabinet Decision No. 52 of 2019 as authority. That decision was expressly
repealed by Article 14 of Cabinet Decision 197 of 2025.

The page contains no mention of the 2025 decision, no per-litre amounts and no reference to the
volumetric model.

We are not scoring a point off a civil servant. The legal position is set by the Cabinet Decision, and
a portal page is guidance, not law. But the practical consequence is real: a business owner who does the
sensible thing — check the government’s own website — will get the wrong answer today. Read the decision.

It is the same pattern we found with
Small Business
Relief, where the Federal Tax Authority’s own guide still prints an end date that a 2026 ministerial
decision has since moved.

What counts as a sweetened drink — and the six carve-outs

A sweetened drink is any product to which a source of sugar, artificial sweeteners or other sweeteners
has been added, produced for consumption as a drink, in any form — ready to drink, concentrate, powder,
gel or extract.

Six things are excluded:

That last one is the practically important carve-out: the latte or fresh juice made in front of you is
outside the regime; the sealed bottle on the shelf is inside it.

Energy drinks are defined broadly — anything marketed or sold as one that may contain stimulants, with
caffeine, taurine, ginseng and guarana named — and drinks containing alcohol are excluded from both the
energy and sweetened categories.

On tobacco, the definition covers everything in Chapter 24 of the GCC Common Customs Tariff,
explicitly including electrically heated cigarettes, and excludes products intended exclusively to assist
smoking cessation. E-liquids and devices are caught whether or not they contain nicotine.

The lab report rule, and the trap in it

Anyone dealing in sweetened drinks must submit a laboratory report acceptable to the Federal Tax
Authority proving sugar and sweetener content. The Authority has urged producers, importers and
stockpilers to obtain accredited conformity certificates with lab reports accredited by the Ministry of
Industry and Advanced Technology.

If you do not produce one, Article 13(4) imposes tax “at the category with the highest quantity of
sugar and other sweeteners” — the top band, by default.

The part worth knowing, and almost never reported: that is retrospectively correctable.
The same article provides for the tax to be re-accounted for under the correct category once an
acceptable report is produced. The default is punitive, not permanent.

Who has to register

Registration is required of anyone importing excise goods into the UAE, producing them for release for
consumption here, stockpiling them in certain cases, or acting as a warehouse keeper for an excise
warehouse or designated zone.

There is no registration threshold. Unlike VAT, where thresholds decide who must
register, any business carrying on a qualifying activity must register regardless of size. Returns are
filed by the 15th day following the end of each tax period. Our guide to
VAT registration covers
the contrast, and our explainers on the
9%
corporate tax regime and
UAE trade licence types cover the
rest of the compliance picture.

How the price is calculated

For goods still taxed as a percentage, the excise price is the higher of the price published in the
Authority’s standard price list, if available, or the designated retail sales price less the tax included
in it. Where the rate is 100%, the tax equals half the designated retail sales price.

The designated retail sales price is itself the higher of the producer or importer’s declared
recommended retail price excluding VAT, or the market average retail selling price excluding VAT.
Hotel and restaurant on-premise mark-ups are excluded from the recommended selling price.

The digital tax stamp

Separately from the rates, tobacco carries a physical control scheme. The Digital Tax Stamp requires
manufacturers and stakeholders to meet enhanced standards for importing and trading tobacco, and the
Authority is unambiguous about the consequence: no cigarette products without a stamp may be imported
into the UAE, and the same applies to water pipe tobacco and electrically heated cigarettes.

It rolled out in phases — cigarettes from the beginning of 2019, waterpipe tobacco and electrically
heated cigarettes from 1 November 2019, with sale and possession of unstamped product in those categories
banned across local markets from 1 January 2021. The current stamp design is set by Federal Tax Authority
Decision No. 3 of 2021.

The scheme covers tobacco only. It does not extend to drinks or to vaping devices.

One thing to be careful about

You may see it written that Federal Decree-Law No. 7 of 2025 replaced the 2017 excise law. That
overstates it. Cabinet Decision 197 of 2025 cites its governing statute in its own preamble as “Federal
Decree-Law No. 7 of 2017 on Excise Tax, and its amendments”. The 2017 law remains the law; 2025 brought
amendments and a new rates decision. The regime sits alongside the GCC Common Excise Tax Agreement,
ratified federally in 2017.

And a framing point worth making, because the phrase “sugar tax” invites it: excise is levied on
import, production and stockpiling, not at the till. It reaches consumers through shelf prices, but you
are not being charged it at the checkout.

Primary sources: the Federal Tax Authority’s published text of
Cabinet
Decision No. 197 of 2025 — the source of record for every rate and definition above; the Ministry of
Finance’s
announcement
of the tiered volumetric model; the FTA’s
clarification
of the new model, its
Digital
Tax Stamps page and its
five-year
retrospective; and the UAE Government portal’s
excise
tax page, cited here for the registration rules and as the evidence for the stale-rates point above,
checked 20 August 2026. This article is general information, not tax advice.