Saudi Arabia Unveils New Tiered Sugar Tax on Beverages Starting January 1

Post by : Bianca Suleiman

Saudi Arabia is set to launch a new four-tier excise tax on sweetened drinks as of January 1, according to the Zakat, Tax and Customs Authority (ZATCA). This new system replaces the existing flat-rate excise tax.

In the updated framework, the excise duty will not be fixed at 50 percent of the retail price anymore. Instead, it will vary based on the sugar content per 100 millilitres in beverages, marking a significant reform in the taxation of sweetened drinks within the Kingdom.

Four Defined Categories Based on Sugar Content

The newly implemented system classifies sweetened beverages into four distinct categories according to their sugar levels:

• Tier 1: Products containing only artificial sweeteners without added sugars

• Tier 2: Low-sugar drinks with less than 5 grams of sugar per 100 ml

• Tier 3: Medium-sugar beverages containing between 5 and 7.99 grams per 100 ml

• Tier 4: High-sugar drinks with 8 grams or more of sugar per 100 ml

Excise taxes will be determined based on the sugar content within each tier, particularly impacting ready-to-drink options.

Wide Reach of Application

ZATCA clarified that this revised taxation approach encompasses all types of sweetened beverages, including ready-to-drink products as well as concentrates, powders, gels, and extracts that can be transformed into drinks.

Commitment to Public Health Initiatives

The authority stated that this reform aims to promote public health by curbing high sugar consumption. By aligning tax rates with sugar content, the government seeks to motivate producers and importers to lower sugar levels in their offerings.

Part of a Wider GCC Initiative

ZATCA highlighted that the revision correlates with a recommendation from the Gulf Cooperation Council's Financial and Economic Cooperation Committee, which endorsed a tiered, volumetric excise tax system for sweetened beverages throughout the region. This initiative is part of broader GCC efforts to mitigate health issues associated with sugar consumption and to encourage healthier habits among consumers.