Saudi Gazette report
RIYADH — The Saudi Zakat, Tax and Customs Authority (ZATCA) will introduce a revised 4-tier methodology for calculating excise tax on sweetened beverages, effective from Thursday, Jan. 1.
This system, which is shifting from a flat 50 percent rate to a system based on sugar content (grams per 100ml), with tax rates increasing for higher sugar levels and exemptions for sugar-free or low-sugar drinks, aiming to promote public health and encourage sugar reduction in alignment with GCC health initiatives.
The ZATCA Board of Directors has approved amendments to some provisions of the executive regulations of the Excise Goods Tax Law in this regard. The approved amendments include modifying the methodology for calculating excise tax on sweetened beverages to be based on the total amount of sugar content in the sweetened beverage.
The authority explained that the revised methodology for calculating the excise tax on sweetened beverages is based on a tiered tax bracket system. This system calculates the tax value according to the total sugar content per 100 ml of the ready-to-drink sweetened beverage that falls within that bracket.
The authority divided the brackets into three categories: the first bracket includes beverages sweetened with only artificial sweeteners and no added sugar; the second bracket includes low-sugar sweetened beverages (less than 5 grams per 100 ml); the third bracket includes medium-sugar sweetened beverages (5 to 7.99 grams per 100 ml); and the fourth bracket includes high-sugar sweetened beverages (8 grams or more per 100 ml).
According to ZATCA, this new methodology replaces the current excise tax on sweetened beverages, which is based on a fixed rate of 50 percent calculated on the retail price of the taxable sweetened beverage. The authority clarified that sweetened beverages refer to any product to which a source of sugar or other sweeteners has been added, and which is produced for consumption as a beverage. This includes beverages in all their forms, such as ready-to-drink drinks, concentrates, powders, gels, extracts, or any other form that can be converted into a beverage.
The authority emphasized that the new methodology for calculating the excise tax on sweetened beverages, based on the total sugar content, aims to promote public health and encourage a reduction in sugar consumption in sweetened beverages. This will be achieved by incentivizing producers and importers to provide consumer beverages with a lower total sugar content, in accordance with international best practices.
The implementation of this new methodology is based on a decision by the Financial and Economic Cooperation Committee of the Gulf Cooperation Council (GCC) to amend the mechanism for calculating the excise tax on sweetened beverages to adopt a volumetric, tiered system based on sugar concentration.
