Energy drinks, along with tobacco, will attract a selective tax of 100%, while soft drinks will carry a 50% levy, according to the Ministry of Finance.
"The tax shall impact all excise goods consumed inside the country, including all the country's free zones and ports," said Younis Haji Al Khouri, the ministry’s undersecretary.
Soft drink cans, which usually retail for AED1.50 (US$0.41) will cost AED2.25, while the price of a 355ml can of Monster energy drink will double to AED12.
“The project diversifies the government’s revenue streams and boosts its resources, which, in turn, will strengthen the economy and ensure its sustainability," said Sheikh Hamdan bin Rashid Al Maktoum, the finance minister and chairman of the Federal Tax Authority.
"The excise tax, in particular, will help us build a healthier and safer society. This tax is set to discourage the consumption of products that negatively impact the environment and, more importantly, people’s health, while the revenues it generates will go towards supporting advanced services for all members of society.”
The UAE will be the second Gulf country to introduce excise taxes after Saudi Arabia, which began taxing at the same rate in June.
The law is expected to be followed by the publication of the value-added tax, which will be implemented at a GCC-wide rate of 5% starting January 1, 2018.
The introduction of these taxes comes as the UAE and other GCC states rush to introduce levies to make up for dwindling oil income caused by a slide in revenues since mid-2014.
The announcement comes on the back of a federal decree which defined “excise goods”. These are calculated at the discretion of the UAE federal cabinet on the recommendation of the finance minister, provided they do not exceed 200% of an item’s excise price.
The sin tax expected to generate annual revenues in the region of AED7bn (US$1.9bn) for the federal budget.