Saudi Arabia to Implement Four-Level Excise Tax on Sweetened Drinks According to Sugar Levels Starting January 1, 2026 | Global News

Excise Tax on Sweetened Beverages in Saudi Arabia

Starting January 1, 2026, Saudi Arabia will implement a new four-tier excise tax on sweetened beverages based on their sugar content. This change is set to replace the existing flat 50% tax rate, leading to potential price increases for consumers.

New Tax System Overview

Under the new system, beverages with higher sugar levels will be taxed more heavily, while sugar-free and low-sugar options will see reduced or no tax burdens. The Zakat, Tax and Customs Authority (ZATCA) aims to decrease sugar consumption and encourage healthier drinking habits, aligning with public health initiatives in the Gulf Cooperation Council (GCC).

Transition from Flat Tax to Sugar-Based System

Previously, sweetened beverages in Saudi Arabia faced a fixed excise tax of 50% on their retail price. The upcoming tax will adjust based on the total sugar content per 100 milliliters:

• Higher sugar concentrations will incur steeper taxes.
• Sugar-free or low-sugar drinks will benefit from lower or no tax.

ZATCA’s Board of Directors has approved amendments to implement this new tax system, emphasizing its objective to promote production of lower-sugar beverages.

The Four-Tier Tax Structure

The new excise tax will categorize sweetened beverages into four tiers based on sugar content:

1. Tier 1 – Artificially Sweetened Beverages: Drinks with only artificial sweeteners and no added sugar.
2. Tier 2 – Low-Sugar Beverages: Drinks containing less than 5 grams of sugar per 100 ml.
3. Tier 3 – Medium-Sugar Beverages: Drinks that include 5 to 7.99 grams of sugar per 100 ml.
4. Tier 4 – High-Sugar Beverages: Drinks containing 8 grams or more of sugar per 100 ml.

This excise tax will apply to various forms of sweetened beverages, including ready-to-drink, concentrates, powders, gels, and extracts.

Public Health and GCC Alignment

ZATCA emphasized that this reform is part of a comprehensive public health strategy intended to mitigate health risks linked to sugar consumption. By correlating tax rates with sugar content, the new system incentivizes producers and importers to focus on healthier beverage options, making them more accessible to consumers.

This initiative is also consistent with the Gulf Cooperation Council’s plan to implement a region-wide, tiered excise tax on sweetened beverages, addressing increasing health concerns related to high sugar intake.

Consumer and Producer Expectations

With the introduction of the four-tier system, here’s what consumers and producers can anticipate:

• Price Variations: Consumers may experience price increases on higher-sugar beverages.
• Product Reformulation: Producers and importers are encouraged to lower sugar levels in their products to avoid being placed in higher tax brackets.
• Commitment to Health: This change signifies Saudi Arabia’s dedication to promoting healthier consumption patterns in line with global sugar taxation trends.

UAE Implements Similar Sugar-Based Beverage Tax

In addition to Saudi Arabia, the UAE has announced a similar sugar-based excise tax on beverages set to start on January 1, 2026. This initiative aims to encourage the production of lower-sugar beverages and support regional efforts to decrease sugar consumption while promoting healthier lifestyle choices.