Saudi Arabia to roll out four-tier excise tax on sweetened drinks from Jan 1

Dubai: Saudi Arabia will introduce a new four-tier excise tax system on sweetened beverages from Jan. 1, replacing the current flat-rate levy with a model that links taxation directly to sugar content, the Zakat, Tax and Customs Authority (ZATCA) said.

Under the revised methodology, excise tax will be calculated based on the total amount of sugar per 100 millilitres of a sweetened beverage, replacing the existing 50 per cent tax applied to the retail price.

The change follows the approval of amendments to provisions of the executive regulations of the Excise Goods Tax Law by ZATCA’s board of directors.

The new system introduces a tiered structure that classifies sweetened beverages into four brackets. 

Drinks sweetened solely with artificial sweeteners and containing no added sugar fall into the first tier. Low-sugar beverages, with less than five grams of sugar per 100 ml, form the second tier, while medium-sugar drinks, containing between five and 7.99 grams per 100 ml, make up the third. Beverages with eight grams of sugar or more per 100 ml are classified in the highest tier.

According to the authority, the excise tax will be calculated based on the sugar content of ready-to-drink beverages within each bracket. 

The revised methodology applies to all forms of sweetened beverages, including ready-to-drink products as well as concentrates, powders, gels and extracts that can be converted into drinks.

ZATCA said the new approach is intended to support public health objectives by encouraging a reduction in sugar consumption. By linking tax levels to sugar concentration, the system is designed to incentivise producers and importers to offer beverages with lower sugar content, in line with international best practices.

The authority noted that the reform is based on a decision by the Gulf Cooperation Council’s Financial and Economic Cooperation Committee to adopt a volumetric, tiered excise tax system for sweetened beverages across the region, reflecting broader GCC efforts to address health risks associated with high sugar intake.