Saudi Arabia: Sugary drinks tax to be calculated based on sugar content starting in 2026
The Zakat, Tax and Customs Authority in the Kingdom of Saudi Arabia announced the adoption of significant amendments to the executive regulations of the Selective Tax Law, specifically concerning the mechanism for calculating taxes on sweetened beverages. Under the new decision, the current fixed percentage system will be replaced with a new methodology based on the total amount of sugar in the product. This decision will take effect on January 1, 2026.
Details of the new methodology and tax brackets
The authority explained that the new mechanism will rely on a tiered tax system directly linked to the sugar content per 100 ml of the beverage. This shift aims to replace the current methodology, which imposes a 50% tax on the retail price, with a more accurate and equitable system that considers the product's nutritional content. In this context, the definition of sweetened beverages includes all products 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.
Context of applying selective tax in Saudi Arabia
This decision is an extension of the financial and health policies that the Kingdom began implementing in mid-2017, when selective taxes were first imposed on goods with health risks, such as tobacco, energy drinks, and soft drinks. In December 2019, the scope was expanded to include sweetened beverages. These taxes are part of the economic and financial reforms under the umbrella of the Kingdom's Vision 2030, which aims to diversify non-oil revenue sources and enhance the quality of life.
Health goals and their alignment with Vision 2030
The new amendment is not solely driven by financial considerations; it also carries strategic health implications. Through its Quality of Life Program, the Kingdom aims to reduce obesity rates and chronic diseases such as diabetes, which are closely linked to excessive sugar consumption. The new approach is expected to encourage consumers to make healthier choices and will also provide a strong incentive for manufacturers and importers to reformulate their products and reduce sugar content to avoid higher tax brackets, ultimately benefiting public health.
Regional dimension and Gulf decisions
It is worth noting that the application of this methodology is based on a decision by the Financial and Economic Cooperation Committee of the Gulf Cooperation Council (GCC) countries. This approach reflects the ongoing coordination among GCC member states to unify tax and economic policies and ensure the application of internationally recognized best practices in combating harmful products to public health, thereby strengthening the integration of the Gulf economic system in addressing shared health challenges.
