TAX NEWS: FTA PUBLIC CLARIFICATION EXTP012 - EFFECTIVE FROM 1 JANUARY 2026
TAX NEWS: FTA PUBLIC CLARIFICATION EXTP012 - EFFECTIVE FROM 1 JANUARY 2026
On 5 September 2025, the Federal Tax Authority (FTA) issued Public Clarification EXTP012, outlining expected amendments to the UAE Excise Tax legislation to introduce a tiered‑volumetric model for the calculation of Excise Tax on Sweetened Drinks.
This marks a significant shift from the current ad valorem method (based on a percentage of the Excise Price), and is designed to better reflect sugar content in determining Excise Tax liability.
1. New Definition of Sweetened Drinks
Under the revised rules, a Sweetened Drink is defined as:
“A product to which a source of sugar, artificial sweeteners or other sweeteners is added, that is produced for consumption as a drink — whether ready to drink, or in the form of concentrates, powders, gels, extracts or any other form that can be converted into a drink.”
2. Tiered‑Volumetric Tax Structure
The Excise Tax will be calculated based on the total amount of sugar and other sweeteners (excluding artificial sweeteners) per 100 ml of the beverage. The following tax bands will apply:
3. Reclassification of Carbonated Drinks
Carbonated Drinks will no longer be treated as a separate Excise category. Instead, these beverages will be assessed under the new definition of Sweetened Drinks, and taxed based on sugar content and classification.
4. Lab Report Requirement for Registration
From a date to be announced by the FTA, Taxable Persons may only register (or update existing registrations of) beverages as Excise Goods through the FTA’s Excise Goods portal, where they must provide the following supporting documentation:
5. Transitional Provisions
The FTA will issue detailed transitional rules covering:
6. Excluded Products
The following are not classified as Sweetened Drinks under the new regime:
The move to a tiered volumetric Excise Tax model is a positive and progressive development. By aligning tax rates with actual sugar content, the regime promotes healthier consumption, greater fairness, and transparency. Previously, higher-priced low-sugar drinks could be taxed more than cheaper high-sugar ones — a disparity now addressed.
While the change introduces compliance challenges, especially around lab testing and product re-registration, it also creates opportunities for businesses to reformulate products, tap into low- or no-sugar segments, and plan with greater certainty.
Overall, this reform aligns with broader public health objectives. With this initiative, the UAE takes an important initial step in rationalizing the application of Excise Tax on sugary products — a shift from flat tax structures toward a more nuanced model, and a notable contrast to the standard approaches still used in other GCC countries.
This marks a significant shift from the current ad valorem method (based on a percentage of the Excise Price), and is designed to better reflect sugar content in determining Excise Tax liability.
Key Changes under the New Regime
1. New Definition of Sweetened DrinksUnder the revised rules, a Sweetened Drink is defined as:
“A product to which a source of sugar, artificial sweeteners or other sweeteners is added, that is produced for consumption as a drink — whether ready to drink, or in the form of concentrates, powders, gels, extracts or any other form that can be converted into a drink.”
2. Tiered‑Volumetric Tax Structure
The Excise Tax will be calculated based on the total amount of sugar and other sweeteners (excluding artificial sweeteners) per 100 ml of the beverage. The following tax bands will apply:
| Category | Sugar Content (per 100 ml) | Excise Tax Treatment |
| High Sugar | ≥ 8g | Subject to tax at the highest rate (to be specified by Cabinet Decision) |
| Moderate Sugar | ≥ 5g and < 8g | Subject to tax at a moderate rate (to be specified) |
| Low Sugar | < 5g | Subject to tax at a lower rate (to be specified) |
| Artificial Sweeteners Only | 0g sugar/other sweeteners | 0% Excise Tax |
3. Reclassification of Carbonated Drinks
Carbonated Drinks will no longer be treated as a separate Excise category. Instead, these beverages will be assessed under the new definition of Sweetened Drinks, and taxed based on sugar content and classification.
4. Lab Report Requirement for Registration
From a date to be announced by the FTA, Taxable Persons may only register (or update existing registrations of) beverages as Excise Goods through the FTA’s Excise Goods portal, where they must provide the following supporting documentation:
- A laboratory report from a UAE-accredited laboratory confirming:
- Whether the drink contains added sugar, other sweeteners, or artificial sweeteners
- The total amount of sugar or other sweeteners per 100 ml
- MOIAT (Ministry of Industry and Advanced Technology) will publish a list of accredited labs for this purpose.
5. Transitional Provisions
The FTA will issue detailed transitional rules covering:
- Treatment of stockpiled Sweetened Drinks
- Situations where products were classified or taxed prior to lab testing
- Mechanisms for Excise Tax adjustments due to post‑registration reclassification
6. Excluded Products
The following are not classified as Sweetened Drinks under the new regime:
- Energy Drinks (still subject to existing Excise Tax of 100% of the Excise Price)
- 100% natural fruit/ vegetable juices with no added sugar or sweeteners
- Milk and dairy products
- Baby formula, follow-up formula, or baby food
- Beverages/ concentrates for special dietary and medical use
- Beverages prepared by natural persons for personal/non-commercial use
- Beverages prepared and served in open containers (e.g. restaurants) that are not hermetically sealed
BDO COMMENTS
The move to a tiered volumetric Excise Tax model is a positive and progressive development. By aligning tax rates with actual sugar content, the regime promotes healthier consumption, greater fairness, and transparency. Previously, higher-priced low-sugar drinks could be taxed more than cheaper high-sugar ones — a disparity now addressed.While the change introduces compliance challenges, especially around lab testing and product re-registration, it also creates opportunities for businesses to reformulate products, tap into low- or no-sugar segments, and plan with greater certainty.
Overall, this reform aligns with broader public health objectives. With this initiative, the UAE takes an important initial step in rationalizing the application of Excise Tax on sugary products — a shift from flat tax structures toward a more nuanced model, and a notable contrast to the standard approaches still used in other GCC countries.
How we can support
- Review product formulations to assess sugar and sweetener content supported by reports issued by accredited laboratories (once announced) to align with 12-digit Customs Harmonized System of Nomenclature (HSN) and the proposed Excise Tax treatment.
- Assist in updating product registrations and managing documentation on the FTA portal.
- In coordination with in-house legal experts, assist with dispute resolution associated with applying correct proposed Excise Tax treatment.
- Assist with managing transitional and go-live compliance while monitoring FTA and MOIAT continues to provide updates on implementation dates, rates, and transitional provisions.