Post by : Badri Ariffin

Starting January 1, Saudi Arabia is set to roll out a new four-tier system for taxing sweetened beverages, according to the Zakat, Tax and Customs Authority (ZATCA). This new regime will replace the existing flat-rate tax on sugary drinks.

Under this updated approach, the excise tax will be determined not as a fixed percentage of the retail price, but rather based on the sugar content per 100 millilitres of the beverage. This represents a significant change in the taxation of sweetened drinks in the Kingdom.

Structured by Sugar Content

The new tax regime divides sweetened beverages into four categories depending on their sugar levels:

• Tier 1: Beverages that utilize only artificial sweeteners without added sugars

• Tier 2: Low-sugar drinks with under 5 grams of sugar per 100 ml

• Tier 3: Medium-sugar beverages that contain between 5 and 7.99 grams per 100 ml

• Tier 4: High-sugar beverages featuring 8 grams or more of sugar per 100 ml

The excise tax will now be computed according to the sugar level within each specified category, especially for ready-to-drink options.

Comprehensive Applicability

The new tax model from ZATCA will affect all sweetened beverages, including ready-to-drink items along with concentrates, powders, gels, and extracts that can be processed into drinks.

Enhancing Public Health

This reform is intended to bolster public health by discouraging high sugar consumption. By directly tying tax rates to sugar levels, the goal is to motivate manufacturers and importers to limit sugar in their products.

Aligned with GCC Initiatives

ZATCA emphasized that this action aligns with a decision from the Gulf Cooperation Council’s Financial and Economic Cooperation Committee, which has advocated for a volumetric, tiered sugar tax system throughout the region. This initiative is part of broader GCC efforts aimed at reducing health risks associated with high sugar consumption and promoting healthier lifestyle choices.

#Global News