The Zakat, Tax and Customs Authority in the Kingdom of Saudi Arabia announced a significant step aimed at enhancing public health and developing tax policies, with the adoption of new amendments to the executive regulations of the Selective Tax Law. Under this decision, a new mechanism for calculating taxes on sweetened beverages will be implemented starting January 1, 2026, shifting from a fixed percentage system to a more precise methodology based on the total amount of sugar in the product.
Details of the new methodology and tax brackets
The authority explained that the new system will be based on a tiered tax bracket directly linked to the sugar content per 100 ml of beverage. This step replaces the current methodology, which imposes a fixed excise tax of 50% of the retail price. This more precise calculation aims to achieve tax fairness and encourage manufacturers and importers to reformulate their products to reduce sugar content, in line with international standards and global best practices in combating chronic diseases.
The historical context of selective tax in the Kingdom
This decision is not a spur-of-the-moment move, but rather an extension of a series of economic and health reforms initiated by the Kingdom years ago. Saudi Arabia first implemented the selective tax in June 2017, initially applying a 50% tax to soft drinks and a 100% tax to energy drinks and tobacco. In December 2019, the Kingdom expanded the tax to include beverages sweetened with added sugar. The new amendment for 2026 aims to enhance the efficiency of this tax system, based on the decisions of the Financial and Economic Cooperation Committee of the Gulf Cooperation Council (GCC), which approved a shift towards a gradual, volume-based approach.
Alignment with Vision 2030 and promoting public health
This decision aligns with the goals of Saudi Vision 2030, specifically the Quality of Life Program, which aims to reduce obesity, diabetes, and non-communicable diseases in Saudi society. Health reports indicate that excessive sugar consumption is a major contributor to these diseases, making fiscal policies an effective tool for changing consumer behavior. This decision is expected to encourage consumers to choose healthier alternatives and incentivize companies to offer products with lower sugar content to avoid higher tax brackets.
Definition of taxable beverages
The authority confirmed that the legal definition of sweetened beverages includes any product to which any source of sugar or other sweeteners has been added, and which is produced for consumption as a beverage. This is not limited to ready-to-drink beverages, but extends to concentrates, powders, gels, extracts, and any other form that can be converted into a beverage, thus ensuring comprehensive application and preventing any loopholes that could be exploited to evade the new tax classification.
