The Ministry of Finance (MoF) and Federal Tax Authority (FTA) recently announced for an amendment in the Excise Tax legislation on Sugar Sweetened Beverages through introduction of a Tiered Volumetric Model.
In this regard, the FTA has now issued a Public Clarification EXTP012, outlining key upcoming amendments to the Excise Tax regime for Sweetened Drinks (SDs), which are expected to come into effect from 1 January 2026. The copy of public clarification is attached herewith for your reference. The key aspects of the Public Clarification are summarized below:
1. New Definition of Sweetened Drinks
- Any product to which sugar, artificial sweeteners, or other sweeteners are added and is produced for consumption as a drink
- Includes ready-to-drink beverages, concentrates, powders, gels, and extracts
- Drinks containing only natural sugars (without added sugar/sweeteners) will not be subject to Excise Tax
2. Transition to a Tiered-Volumetric Model
- Previous uniform rate of 50% on the retail price has been replaced with a variable tax, calculated according to the sugar or other sweetener content (excluding artificial sweeteners) per 100ml of the beverage
| Category | Sugar Content (per 100ml) | Excise Tax Treatment |
|---|---|---|
| High Sugar | ≥8g | Taxable at highest rate |
| Moderate Sugar | ≥5g and <8g | Taxable at moderate rate |
| Low Sugar | <5g | Taxable at lowest rate |
| Artificial Sweeteners Only | 0g added sugar | 0% Excise Tax |
Note: Tax rate to be confirmed by a Cabinet Decision
3. Treatment of Specific Products
- Carbonated Drinks: No longer a separate category; taxability will depend on sugar content
- Energy Drinks: Continue under current rule (100% Excise Tax on retail price)
- Exclusions from the definition of Sweetened Drinks: 100% natural juices, milk/dairy, baby formula, special dietary/medical-use beverages, and drinks prepared for personal/non-commercial use or served fresh in restaurants
4. Compliance Requirements
- Taxable persons must register or update the products on the FTA Excise Goods portal to confirm if they qualify as Excise Goods (i.e., Sweetened Drinks)
- Laboratory certification: Mandatory FTA-approved lab reports on sugar content for registration of Sweetened Drinks as excise goods
- If no lab report is submitted, the drink would be deemed high sugar until proven otherwise
- The Ministry of Industry & Advanced Technology (MOIAT) would publish a list of accredited labs
5. Key Actions Steps
- Review the sugar content of the beverage products and assess whether they may fall within the scope of the new Sweetened Drinks definition
- Initiate engagement with accredited laboratories (once the details of such laboratories are published) to ensure timely testing and obtaining the required sugar content certifications.
Click to download a copy of the Excise Tax Public Clarification