Excise tax across the GCC: sugar tiers, tobacco and energy drinks
A narrow, heavy tax charged once on release into each market, which since 2026 measures sweetened drinks in grams of sugar. Here is how it works across the Gulf and where it catches importers out.
What excise is for, and how it differs from VAT
Excise tax in the Gulf is a narrow, heavy tax on a short list of goods the governments want people to consume less of: tobacco and its electronic successors, energy drinks, sugary drinks and, in one state, alcohol and pork products. It was introduced under the GCC Common Excise Tax Agreement of 2016, starting in Saudi Arabia in June 2017, the UAE in October 2017, Bahrain at the end of 2017, Qatar in January 2019 and Oman in June 2019. Kuwait has not introduced it.
Unlike VAT, which is charged at every stage of the supply chain and recovered by businesses along the way, excise is charged once, at the moment the goods enter the taxable market: when they are imported, when they are produced locally, or when they leave a licensed excise warehouse or designated zone. The importer or producer pays it, and it then sits in the price of the product all the way to the consumer. Businesses further down the chain do not recover it. VAT is then charged on top, on a price that already includes the excise, so for an energy drink taxed at 100% the consumer pays VAT on a doubled price.
From a flat 50% to tiers per litre
For most of its history, Gulf excise on soft drinks was a percentage of the retail price: 50% on carbonated and sweetened drinks, 100% on energy drinks. That design taxed a sugar-free cola exactly like a sugary one, which undermined the health purpose. On 8 October 2025 the GCC's Financial and Economic Cooperation Committee approved an amendment introducing a tiered volumetric model, under which sweetened drinks are taxed per litre according to the total sugar and sweetener content per 100 millilitres.
Saudi Arabia and the UAE implemented it from 1 January 2026. In both, drinks containing 8 grams or more of sugar per 100 millilitres pay 1.09 per litre in local currency, SAR or AED, drinks with 5 grams to less than 8 grams pay 0.79 per litre, and drinks below 5 grams, or sweetened only with artificial sweeteners, pay nothing. The rules cover not only ready-to-drink products but also concentrates, powders, gels and extracts that are made into drinks, measured on the drink they produce. Saudi Arabia used the change to remove carbonated drinks as a separate excise category, so a sugar-free soda no longer pays excise there merely for being fizzy, and at the same time its tariff gained new subheadings by sugar content so that customs and excise data line up. Qatar followed with Law No. 2 of 2026, which amended its excise law and applied a tiered model for sweetened drinks from July 2026. Bahrain has approved the GCC amendment, while Oman and Bahrain were still reported to apply the older percentage rates on soft drinks in mid-2026; producers selling there should confirm the position at the time of sale.
Tobacco, vaping and energy drinks
The rest of the excise list has not moved. Tobacco and tobacco products, electronic smoking devices and the liquids used in them, and energy drinks carry 100% in every state that levies excise. Oman also applies 100% to alcohol and pork products as special purpose goods, and Qatar treats alcohol through the pricing of its state distributor rather than its excise law, as our guide to alcohol across the Gulf explains.
For these products the base is the retail selling price, not the import price, and the authorities do not simply accept the price an importer declares. Saudi Arabia's December 2025 amendments to the excise regulations allow ZATCA to reject a declared retail price and apply a reference retail selling price, and other states use published standard prices in the same way. Tobacco products must also carry digital tax stamps in several states, linking each pack to a declared and taxed import, so that untaxed goods can be identified on the shelf.
How excise is administered
Anyone who imports excise goods, produces them, or stores them in an excise warehouse must register with the tax authority, regardless of turnover; there is no small-business threshold for excise. Products must usually be registered too, with their sugar content now part of the product data for drinks, and many states have moved product registration onto the same online platforms used for VAT. Returns are filed periodically and the tax is paid on release, so cash flow depends on when goods leave bond rather than when they are sold.
Excise warehouses and designated zones are the main planning tool. Goods held in a licensed excise warehouse pay no excise until they are released for consumption, which lets an importer keep stock for several markets without paying tax in any of them until the goods are actually sold. Goods exported to another GCC state are generally relieved or refunded in the state of departure, with evidence, and taxed in the state of arrival, because, as with VAT, intra-GCC movements are treated in practice as exports and imports. A product taxed in Dubai and then shipped to Bahrain will pay Bahraini excise on arrival, and the UAE relief must be claimed with proper documents rather than assumed.
Under the sugar tiers, cutting sugar from 8.5 grams to 7.5 grams per 100 millilitres moves a drink from the top tier to the middle one, and below 5 grams removes excise altogether. Product development, labelling and tax have become the same conversation for beverage companies in the Gulf.
An importer of drinks into Saudi Arabia and the UAE
A beverage importer brings three products into Saudi Arabia and the UAE in 2026: a regular cola with 10.6 grams of sugar per 100 millilitres, a reduced-sugar version with 6 grams, and a zero-sugar version sweetened artificially. Under the old system, all three paid 50% of the retail selling price, so the zero-sugar cola carried the same excise as the regular one. Under the tiers, a litre of the regular cola pays 1.09 in local currency, a litre of the reduced-sugar version 0.79, and the zero-sugar version nothing.
On a two-litre bottle retailing at the equivalent of 7, the old 50% excise was 3.50 of tax inside the price. The new charge on the regular version is 2.18, on the reduced-sugar 1.58, and on the zero-sugar nothing, before VAT. The importer's margins, shelf prices and product mix all change, and its registrations must now carry accurate sugar data for each product, because the tier is assessed on it and the authorities will check. An importer that declares a reduced-sugar product in the wrong tier will be assessed for the difference and penalties, and the error will usually surface when a laboratory test is compared with the label.
Planning across several states
For a distributor serving several Gulf states, excise is the tax most likely to be paid in the wrong place. Because it is charged on release into a market, goods cleared and taxed in one state and then moved to another can end up taxed twice unless the export relief in the first state is claimed, and the conditions for that relief are documentary and time-limited. The usual solution is to hold excise stock in bond or in a designated zone and release it into each market only when it is sold there, paying that market's excise at that moment.
With Saudi Arabia, the UAE and Qatar now on sugar tiers and Bahrain and Oman expected to follow, the rules are converging again after years in which each state's percentage rates diverged. Convergence helps planning, but it does not remove the need to register in each state where goods are released, to keep product data current, and to watch for the remaining differences until every state has implemented the GCC amendment.
Why the declared price is not the last word
For products still taxed as a percentage, tobacco, vaping products and energy drinks, the excise base is the retail selling price that the consumer will pay, not the price at which the importer bought the goods. Importers declare that price when they register the product, and the authorities compare it with published standard or reference prices and with prices actually seen in shops. Where a declared price is lower, the authority can apply its own figure and assess the difference with penalties. An importer that discounts heavily at launch, or sells through channels with unusually low shelf prices, should expect questions, and should keep the evidence that supports the price it declared.
Questions we get asked first
Which goods are subject to excise tax in the GCC?
Tobacco and tobacco products, electronic smoking devices and liquids, energy drinks and sweetened drinks, and in Oman also alcohol and pork products. Kuwait has not introduced excise.
How are sweetened drinks taxed from 2026?
In Saudi Arabia and the UAE from 1 January 2026, by sugar content: 1.09 per litre at 8 grams or more per 100 millilitres, 0.79 per litre from 5 to under 8 grams, and nothing below 5 grams or with only artificial sweeteners. Qatar applied a tiered model from July 2026 under Law No. 2 of 2026.
Are carbonated drinks still subject to excise in Saudi Arabia?
Saudi Arabia removed carbonated drinks as a separate excise category from 2026; sugary drinks are taxed under the sugar tiers.
Who must register for excise tax?
Anyone importing, producing or storing excise goods in an excise warehouse, with no turnover threshold. Products usually need to be registered as well.
Is excise charged again when goods move between GCC states?
Excise is charged on release in the state of arrival. The state of departure generally relieves or refunds its excise on export, with evidence, so documents decide whether goods are taxed once or twice.
What is the excise base for tobacco and energy drinks?
The retail selling price, and authorities can apply a reference or standard price where the declared price is too low.
A narrow tax, now measured in grams
Gulf excise taxes a short list of goods heavily and once, on release into each market. Since 2026 sweetened drinks are taxed by sugar content in Saudi Arabia, the UAE and Qatar, while tobacco, vaping products and energy drinks stay at 100%. Register before importing, keep product and sugar data accurate, hold stock in bond where you serve several states, and claim export relief with proper documents.
Importing excise goods into the Gulf?
We set up the registrations, warehouse arrangements and product data your route needs in each state.
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This article is general information, current as of 2026, and is not advice for any specific situation. Confirm current rules with the MOIC, the NBR or the relevant authority before acting.