The Price of Sweetness: Germany’s Proposed Sugar-Sweetened Beverages Tax

Germany intends to tax sugary drinks. On 5 October 2026, the draft Sugar-Sweetened Beverages Tax Act was submitted for inter-ministerial consultation. The coalition parliamentary groups intend to introduce it as part of the 2027 Budget Accompanying Act (Haushaltsbegleitgesetz 2027). The tax is to apply to all taxable events occurring after 30 June 2027.

The draft bill has two objectives. Primarily, the tax is intended to help finance part of the federal subsidy to statutory health insurance, following a reduction to this subsidy this year that was smaller than was originally planned politically. Secondly, it aims to reduce sugar consumption. From 2028, the draft bill anticipates revenue of more than 1.1 billion euros per year. Whether this forecast holds true, however, also depends on the extent to which manufacturers alter their recipes and consumers adjust their consumption. 

Below, we first outline how the tax is intended to work. We then highlight where we see a need for legal clarification.

How the system works

Taxable items. The taxable items are based on the customs tariff classification. The tax covers beverages falling under CN headings 2009 (juices) and 2202 (soft drinks and other non-alcoholic beverages). In addition, there are sugar-containing preparations under heading 2106, which, when diluted or dissolved, are intended to produce a taxable drink. A drink is only subject to tax if it has a total sugar content of 5 g per 100 ml or more. This includes all sugar, i.e. both natural and added sugar.

Tax rate. The tax rate per litre depends on the sugar content:

• 0.26 euros for 5 g to less than 7 g per 100 ml
• 0.32 euros for 7 g to less than 10 g per 100 ml
• 0.38 euros from 10 g per 100 ml

In the case of syrups and concentrates, the ready-to-drink beverage is taxed. The mixing ratio specified by the manufacturer or importer in the instructions for use is decisive.

Exceptions. The following products are not subject to tax:

• Juices and juice spritzers without added sugar 
• non-alcoholic alternatives to spirits, as well as drinks falling under certain CN subheadings, including non-alcoholic beer, drinks containing milk fat and plant-based drinks 
• Medicines and foodstuffs for special medical purposes 
• Beverages produced on-site by restaurants, farm shops and kiosks and consumed there 
• Beverages from small independent producers with an annual output of no more than 70,000 litres; the draft treats this exemption as de minimis state aid under Regulation (EU) 2023/2831. However, according to the latest information from political circles in Berlin, the final decision on the de minimis threshold of 70,000 litres has not yet been made: the coalition seems to have already agreed on a (higher) new de minimis threshold of one million litres per year, although this is not yet reflected in the draft.

Administration and Collection. The draft follows the familiar excise duty system. The duty becomes chargeable when beverages are removed from a tax warehouse. The tax warehouse keeper is then liable for the duty. Separate rules apply to imports, commercial purchases from other Member States and mail order sales. Licences for the year 2027 will be granted provisionally and subject to revocation.

Unresolved legal issues

1. Constitutional classification as an excise duty

Since the Federal Constitutional Court’s ruling on the nuclear fuel tax, it has been established that the legislature does not have a free right to create taxes. A new tax must correspond to one of the types of tax laid down in the German Basic Law. In the case of excise duties, the key factor is whether the tax is levied on goods for private consumption and is designed to be passed on to customers.

The federal legislative competence is said to derive from Article 105(2) in conjunction with Article 106(1)(2) of the Basic Law. This presupposes that the levy is in fact an excise duty: it must typically be levied on the private consumption of a consumable good and be designed to be passed on to the end consumer. An independent competence in the field of health policy, on the other hand, would not suffice to create a new type of tax.

The sugar-sweetened drinks tax is closer to the traditional model of an excise duty than the nuclear fuel tax, which was declared unconstitutional. It applies to everyday goods, and the draft legislation expressly provides for the cost to be passed on to end consumers. According to the Federal Constitutional Court, however, it is not the name that is decisive, but the overall structure of the tax. The nuclear fuel tax case also demonstrates that an unconstitutional tax raises significant issues regarding refunds. Companies should therefore assess at an early stage how to safeguard their legal position.

2. Scope of application

The draft is almost entirely based on the classification under the customs tariff. Whilst this has advantages, it shifts many definition issues into the realm of customs tariff law. This is particularly evident in the case of the exemptions for non-alcoholic alternatives. Their scope of application is not yet clear in all respects. Furthermore, the wording of the draft legislation and the explanatory memorandum do not fully correspond. Which products are ultimately exempt will therefore depend largely on their CN classification. Similar classification issues arise in other contexts, such as the treatment of added sugars and various forms of presentation. For manufacturers and importers, formulation and classification thus become tax-relevant issues.

This is all the more true given that the tax rate is linked to fixed thresholds: a beverage containing 4.9 g of sugar per 100 ml is tax-exempt, whilst one containing 5 g is subject to a tax of 0.26 euros per litre. Above 10 g, the tax does not increase further, meaning that, in addition to a tax rate structure that is already degressive, the tax burden per gramme of sugar decreases as sugar content rises, and incentives to reduce sugar content are likely to be strongest at the thresholds of each tax rate step. The small-scale producer scheme contains a similarly strict threshold: anyone producing more than 70,000 litres (or, according to the latest information, probably more than one million litres in future) per year loses the exemption for their entire production.

In addition to this we note a structural detail: Section 1(6) of the draft makes a static reference to the Combined Nomenclature (CN) in the version applicable on 1 January 2026. From a legal point of view, this is not problematic at first glance. However, the reference fixes the system to a specific status of customs law. The CN is amended on a regular basis. Following such an amendment, businesses and the administration might, under certain circumstances, have to apply two versions in parallel: the current one for customs purposes and the static, historical nomenclature for the sugar-sweetened drinks tax. The simplification that the use of CN codes is actually intended to provide is thus at risk of being undermined in future.

3. Principle of equality

The legislator has considerable discretion in selecting the taxable item. However, taxation decisions must be implemented consistently. Exceptions require a justification that is consistent with the purpose of the tax. The explanatory memorandum to the draft bill justifies the tax in particular on the basis of the low satiating effect of liquid sugar. Viewed in this light, the question arises as to why, for example, sugar-rich juices with no added sugar, certain milk and plant-based drinks, and non-alcoholic alternative products are exempt, whilst a lemonade is subject to tax from as little as 5 g of total sugar per 100 ml. The restriction to beverages also raises the question of why other sugary foods are not covered. The draft provides only a brief justification for these distinctions and does not explain in detail which less onerous or more targeted alternatives were considered.

This situation is reminiscent of the EU energy crisis levy, which specifically targets a single sector. The comparison has its limitations, however, because excise duties are, by their very nature, linked to specific goods, whereas the EU energy crisis levy is a so-called ‘personal tax’. If, however, the stated purpose of a tax extends significantly beyond its actual scope of application, the legislator must justify the choice with particular care.

4. EU law

Sugary beverages are not included among the harmonised goods subject to excise duty. These are limited to energy products and electricity, alcohol and alcoholic beverages, and tobacco products. Article 1(3) of the General Excise Duty Directive 2020/262 is therefore decisive. Under this provision, Member States may also tax non-harmonised goods. However, this discretion is not unlimited: the tax must not give rise to formalities connected with the crossing of frontiers and must comply with the primary law requirements on the free movement of goods and the equal treatment of imported goods.

The draft adopts the full procedural law governing harmonised excise duties, including for supplies from other Member States. This includes rules on commercial purchases and a licensing requirement for mail-order businesses. It contains only a general statement regarding compatibility with EU law. Whether all these obligations are purely procedural arrangements for tax collection or whether some of them constitute prohibited border-crossing formalities needs closer examination.

In addition, the structure of the exemptions must be considered. Several exemptions from the scope of application may particularly benefit regionally produced goods and smaller suppliers, whilst the burden falls primarily on industrially manufactured and cross-border distributed beverages. Article 110 TFEU prohibits domestic levies which, directly or indirectly, impose a higher burden on imported goods or protect domestic products. State aid law is also relevant: exemptions from a tax may constitute a selective advantage if they favour market participants that are in a comparable situation in relation to the purpose of the tax. For the small-scale producers’ scheme, the draft draws on the de minimis Regulation. It remains to be seen whether this justification will also hold up in the case of a production volume raised to one million litres. For the remaining exemptions, it does not contain a corresponding classification under state aid law.

5. Tension between the steering and financing objectives

The draft bill combines health-related policy objectives with revenue generation. Whilst this is permissible in principle, it creates a practical tension: if manufacturers reduce the sugar content below the relevant tax rate thresholds, or if consumption falls significantly, the revenue earmarked for financing the statutory health insurance scheme will also be lower. The revenue forecast is therefore particularly uncertain precisely when the tax achieves its policy objective. In this respect, it is surprising that the draft assumes rising revenue over the next years.

Added to this is the social distributional impact. As a passed-on excise duty, it places a burden on purchasers regardless of their income. The legislator should therefore examine not only the health effects but also the price and distributional effects in a transparent manner.

6. Enforcement and proportionality

Enforcement also raises questions. For syrups and concentrates, the tax depends on the mixing ratio specified in the instructions for use. This creates incentives for circumvention and adds to the burden of verification. For ready-to-drink beverages, the draft bill is based on the declared total sugar content. Measurement and labelling tolerances may therefore determine whether a product falls just above or below a tax bracket threshold.

Furthermore, the start date of 1 July 2027 leaves manufacturers, importers and retailers with only a short transition period. Formulas, labels, IT systems, tax warehouses and supply contracts must be adapted. These burdens could become relevant under Article 12(1) of the Basic Law if the transitional rules are insufficient to ensure a legally secure transition.

7. Legislative procedure

The introduction of the bill outside of the ordinary legislative procedure as part of the Budget Accompanying Act shortens the political lead time. This approach is not, in itself, unconstitutional. However, in the case of a new tax law requiring extensive enforcement, it increases the risk that issues relating to classification of covered goods, enforcement and EU law will not be sufficiently discussed and taken into account. It is crucial that the German Federal Parliament is actually able to exercise its constitutional rights of participation in the subsequent proceedings.

Conclusion

The legislative draft is still at an early stage and is likely to undergo further changes during the legislative process. Affected companies should nevertheless prepare at an early stage:

• assess their product range against the scope of application and the tax rate thresholds, and document the relevant CN classification as at 1 January 2026
• prepare license applications, tax warehouses, IT systems and internal record-keeping processes for the planned launch on 1 July 2027
• review contracts and pricing mechanisms in light of the intended tax pass-through, whilst at the same time securing their legal position regarding potential refund claims

It remains to be seen whether the draft bill, in its current form, will result in a law that is constitutional and EU-law compliant, as well as practically enforceable. The decisive factor will be whether the legislator gives due consideration to the selection of taxable products, the exemptions and the cross-border procedure during the further legislative process. We will continue to monitor the proceedings.