Amendment to the tax on sweetened beverages in Saudi Arabia based on sugar content (2026)
The Zakat, Tax and Customs Authority in the Kingdom of Saudi Arabia announced a new strategic step aimed at enhancing public health and developing tax policies, with the adoption of significant amendments to the executive regulations of the selective tax. Under this decision, a new mechanism for calculating taxes on sweetened beverages, based directly on the amount of sugar in the product, will be implemented starting January 1, 2026.
These amendments, approved by the Authority's board of directors, aim to transition from the current fixed percentage system to a more precise methodology based on tiered tax brackets. The tax will be calculated based on the total sugar content per 100 ml of beverage, meaning that products with higher sugar content will be taxed more, and vice versa. This move is intended to incentivize manufacturers and importers to reformulate their products and reduce added sugar levels, in line with global health standards.
Context of the decision and its health and economic objectives
This decision comes as part of the Kingdom's ongoing efforts to achieve the goals of Saudi Vision 2030, specifically the Quality of Life Program, which aims to improve living standards and enhance public health. Like many countries worldwide, the Kingdom faces health challenges related to high rates of obesity, diabetes, and cardiovascular diseases, a significant portion of which are linked to excessive sugar consumption. This shift in tax policy is expected to contribute to changing consumer behavior towards healthier choices and reduce the long-term financial and health burden on the national healthcare system.
Historical background on selective tax in Saudi Arabia
It is worth noting that the Kingdom of Saudi Arabia first implemented the selective tax in mid-2017, as part of the unified selective tax agreement for the Gulf Cooperation Council (GCC) countries. Initially, it included goods with health risks, such as tobacco and its derivatives and energy drinks, at a rate of 100%, and soft drinks at a rate of 50%. Later, in 2019, the tax was expanded to include sugar-sweetened beverages at a rate of 50%. The current shift towards linking the tax to sugar content is a natural evolution of these policies, as international experiences in countries such as the United Kingdom and Mexico have demonstrated that progressive taxation effectively incentivizes companies to reduce the sugar content in their products to avoid higher tax brackets.
Expected impact on markets and consumers
Economically, this decision will provide a strong incentive for the food and beverage sector to innovate and offer healthier alternatives. Manufacturers will be compelled to review the ingredients in their products to ensure they remain competitively priced, ultimately benefiting consumers who will have access to less harmful products. This approach also reflects the Kingdom's commitment to implementing international best practices recommended by the World Health Organization to reduce the consumption of free sugars, further solidifying its position as a leading nation in enacting legislation that supports public health in the region.
