A new mechanism for calculating the tax on sweetened beverages in Saudi Arabia 2026
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, the mechanism for calculating taxes on sweetened beverages will be changed to be based on the amount of sugar in the product instead of the currently applied fixed percentage, effective January 1, 2026.
Details of the new methodology and the shift from the fixed ratio
The new methodology replaces the current system, which imposes a fixed excise tax of 50% of the retail price of sweetened beverages. Instead, a tiered tax bracket will be applied, directly based on the total sugar content per 100 ml of the beverage. The definition of “sweetened beverages” in this context includes any product to which any source of sugar or other sweeteners has been added, whether ready-to-drink, or in the form of concentrates, powders, gels, or extracts that can be converted into beverages.
The context of selective tax in Saudi Arabia and Vision 2030
This decision is not an isolated event, but rather a continuation of the Kingdom's efforts to implement the unified selective tax agreement of the Gulf Cooperation Council (GCC) countries. Saudi Arabia first applied the selective tax in June 2017 to goods with health risks, such as tobacco and energy drinks (at a rate of 100%) and soft drinks (at a rate of 50%). The scope was then expanded in December 2019 to include sweetened beverages. These policies fall within the objectives of the Kingdom's Vision 2030, specifically the Quality of Life Program, which aims to reduce obesity rates and chronic diseases such as diabetes, as the Kingdom is among the countries with high sugar consumption rates.
Regional dimension and the consensus of the GCC countries
The authority explained that this amendment is based on a decision by the Financial and Economic Cooperation Committee of the Gulf Cooperation Council (GCC) countries. This move underscores the GCC countries' commitment to harmonizing financial and economic policies, particularly those related to public health. The shift towards a "gradual volumetric approach" aims to create a unified and equitable standard that links the tax burden to the potential health risk (sugar consumption), making it more aligned with international best practices recommended by global health organizations.
Expected economic and health impacts
This decision is expected to have a dual impact on the local market. From a health perspective, it will contribute to modifying consumer behavior and encouraging them to choose healthier, lower-sugar options to avoid higher costs. From an economic and industrial perspective, this system will provide a strong incentive for manufacturers and importers to reformulate their products and reduce their sugar content to fall under lower tax brackets, thus enhancing competitiveness in providing healthier and higher-quality food products to Saudi society.
