The decision implements a tiered volumetric excise tax model, linking tax rates to the sugar and sweetener content of sweetened beverages, aligning the UAE’s policy with its public health and economic objectives.

UAE Issues Cabinet Decision No. 197 of 2025 on Excise Tax: What Businesses Must Know

On 27 November 2025, the UAE Cabinet issued Cabinet Decision No. 197 of 2025 on Excise Goods, Tax Rates or Amounts Imposed on Excise Goods, and the Methods of Calculating the Excise Price to modernise the country’s excise tax framework. This decision was published officially by the Ministry of Finance and replaces Cabinet Decision No. 52 of 2019. It will be published in the Official Gazette and is effective from 1 January 2026.

The decision implements a tiered volumetric excise tax model, linking tax rates to the sugar and sweetener content of sweetened beverages, aligning the UAE’s policy with its public health and economic objectives.

Legal Basis

Cabinet Decision No. 197 of 2025 is issued in exercise of powers granted by:

• Federal Decree-Law No. 7 of 2017 on Excise Tax, and its amendments;

• Federal Decree-Law No. 13 of 2016 on the Establishment of the Federal Tax Authority and its amendments;

• Federal Decree-Law No. 28 of 2022 on Tax Procedures and its amendments;

• Federal Decree-Law No. 1 of 1972 on the Competencies of Ministries and Powers of the Ministers;

• Federal Decree-Law No. 32 of 2017 ratifying the GCC Common Excise Tax Agreement;

• All as outlined in the decision’s preamble.

This Cabinet Decision builds on the existing excise tax regime and aligns the excise tax structure with evolving economic and public-health considerations.

What Excise Goods Are Covered?

Article 2 of the decision lists the categories of excise goods subject to excise tax:

1. Tobacco and tobacco products

2. Liquids used in electronic smoking devices and tools

3. Electronic smoking devices and tools

4. Energy drinks

5. Sweetened drinks — as defined in Article 7 of the decision.

How Sweetened Drinks Are Defined

Under Article 7, a sweetened drink includes any product intended for consumption as a beverage to which:

• A source of sugar,

• Artificial sweeteners, or

• Other sweetening agents

have been added, whether in ready-to-drink form, concentrate, powder, gel, extract, or other forms convertible into a drink. It also incorporates methodological references to GCC standards for sugar and sweeteners.

The decision excludes certain beverages such as principally milk-based drinks, baby formula, and beverages for special dietary or medical use from this definition.

Under this model, excise tax for sweetened drinks is calculated per litre based on the sugar and sweetener content of the product, rather than a flat percentage-of-price model. This represents a fundamental shift in how excise tax is determined for beverages.

Excise Price Calculation

Article 11 sets out the formula for determining the excise price of goods:

• The excise price is the higher of:
  (a) the price published by the Federal Tax Authority in its standard price list, or
  (b) the designated retail sales price less any VAT included.

• Special provisions on rounding and handling of retail prices are also included to ensure consistency in tax reporting and compliance.

Compliance Requirements and Laboratory Reports

Article 13 empowers the Federal Tax Authority (FTA) to set procedures to verify product classification and ingredient composition:

• The FTA may request laboratory tests or other supporting evidence to confirm whether products qualify as excise goods and under which tax category.

• Taxable persons must submit laboratory reports accepted by the FTA proving the sugar and sweetener content of beverages.

• Where reports are not provided within the specified timeframe, the FTA may treat the product as being in the highest sugar category until proven otherwise.

This ensures accuracy in excise tax application and discourages misclassification.

Repeals and Effective Date

Article 14 repeals Cabinet Decision No. 52 of 2019 and any conflicting provisions, ensuring the new excise framework is applied consistently.

Article 15 confirms the decision will be published in the Official Gazette and that it will be effective from 1 January 2026.

What This Means for Businesses

The move to a tiered volumetric excise tax model aligns tax liability with actual sugar content:

• Companies producing or importing sweetened drinks must evaluate their products based on sugar and sweetener profiles.

• Products with lower sugar content benefit from reduced excise amounts, while high-sugar drinks face higher levies.

• Beverages containing only artificial sweeteners or low sugar (<5 g per 100 ml) are not subject to excise tax under this decision.

• Accurate laboratory reports and conformity documentation must be submitted to the FTA to avoid products being classified in the highest tax tier by default.

These changes affect producers, importers, distributors, and retailers — making compliance planning essential ahead of January 2026.

Conclusion

Cabinet Decision No. 197 of 2025 represents a significant reform to the UAE’s excise tax regime. By introducing a tiered volumetric model linked to the sugar and sweetener content of beverages, the UAE has shifted from a flat excise system to a more nuanced, health-aligned, and transparent structure.

Effective 1 January 2026, this legal framework not only aligns excise tax with broader public health goals but also gives businesses clear legislative mechanisms for classification, pricing, and compliance. Taxable persons should prepare their systems, documentation, and reporting processes to reflect these changes well before the effective date, ensuring they meet regulatory expectations and avoid unintended tax liabilities.