Saudi Arabia Unveils New Sugar Tax Structure for Beverages Starting January 1

Saudi Arabia is set to introduce a new four-tier excise tax framework for sweetened drinks starting January 1, as announced by the Zakat, Tax and Customs Authority (ZATCA).

The revised model replaces the previous flat 50 percent tax imposed on sugary beverages. Now, the tax will directly correlate with the sugar content per 100 millilitres in each drink, representing a significant shift in the taxation of sweetened beverages in the Kingdom.

Four Distinct Sugar Categories

The new tax structure identifies sweetened beverages in four separate tiers based on their sugar levels:

• Tier 1: Beverages containing only artificial sweeteners, no added sugar

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

• Tier 3: Medium-sugar products with 5 to 7.99 grams per 100 ml

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

The excise tax will be computed according to sugar content for each category, particularly affecting ready-to-drink products.

Broad Application Range

ZATCA confirmed that this new approach impacts all types of sweetened beverages, including ready-to-drink options, concentrates, powders, gels, and extracts suitable for conversion into drinks.

Enhancing Public Health

The reform aims to bolster public health initiatives by discouraging high sugar consumption. By linking tax rates to sugar content, the policy is expected to motivate manufacturers and importers to lower sugar levels in their offerings.

Part of a GCC-Wide Initiative

ZATCA mentioned that this development is part of a broader agreement among the Gulf Cooperation Council’s Financial and Economic Cooperation Committee, which has endorsed a tiered, volumetric excise tax on sweetened beverages throughout the region. This initiative reflects a collective effort to address health risks associated with high sugar intake and to promote healthier choices among consumers.