Post by : Bianca
Haleem
Effective January 1, Saudi Arabia will roll out a new four-tier excise tax framework for sweetened drinks, announced by the Zakat, Tax and Customs Authority (ZATCA). This system will succeed the existing flat-rate levy.
Under this revised taxation model, the excise tax will not simply be a fixed percentage based on the retail price. Instead, it will vary according to the sugar content per 100 millilitres in each drink, indicating a significant transformation in the taxation approach towards sweetened beverages in the Kingdom.
Four Distinct Sugar Categories
The new structure categorizes sweetened beverages into four clear tiers based on their sugar content:
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Tier 1: Drinks with solely artificial sweeteners and no added sugar
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Tier 2: Beverages containing less than 5 grams of sugar per 100 ml
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Tier 3: Medium-sugar drinks having between 5 and 7.99 grams per 100 ml
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Tier 4: High-sugar drinks with 8 grams or more of sugar per 100 ml
The excise tax will be determined based on the sugar levels in each category, particularly targeting ready-to-drink products.
Broad Applicability
ZATCA confirmed that this new assessment method is applicable to all types of sweetened beverages, including ready-to-drink items, as well as concentrates, powders, gels, and extracts that can be converted into drinks.
Emphasis on Public Health
This reform aims to bolster public health initiatives by discouraging excess sugar intake. By linking tax rates directly to sugar content, the policy encourages manufacturers and importers to lower the sugar levels in their offerings.
Aligned with GCC Initiatives
ZATCA pointed out that this decision is in harmony with the Gulf Cooperation Council’s Financial and Economic Cooperation Committee's endorsement of a volumetric, tiered excise tax system for sweetened drinks throughout the region. This initiative is part of broader GCC efforts to mitigate health issues associated with high sugar consumption and promote healthier lifestyle choices.
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