Executive summary

On 8 October 2025, the Gulf Cooperation Council (GCC) Financial and Economic Cooperation Committee issued an amendment to the excise tax methodology for sweetened beverages, shifting the basis of taxation to the total sugar content per beverage. This new approach, termed the Tiered Volume-Based Excise Tax Model (Amendment), will supersede the current fixed rate of 50% of the retail price, introducing a system that calculates tax according to the sugar content per 100 ml of ready-to-drink beverages.

The revised methodology will impose excise tax based on the total sugar content per 100 ml of sweetened beverages. This tiered structure will categorize beverages into segments, enhancing clarity on the application of excise tax.

Detailed discussion

Background

The introduction of excise tax across GCC countries is part of broader fiscal reforms aimed at curbing the consumption of unhealthful products. Saudi Arabia initiated this tax in 2017, applying a 100% rate on tobacco and energy drinks and a 50% rate on carbonated drinks, later extending it to sweetened beverages in 2019.

The Zakat, Tax and Customs Authority (ZATCA) published the proposed amendments to the Executive Regulations of the Excise Tax Law on the "Istitlaa" platform for public consultation, inviting stakeholders to provide feedback by 23 October 2025.

The new excise tax system for sweetened beverages follows from the consultation process.

Highlights of the Amendment

The Amendment introduces a new methodology for calculating excise tax as follows:

Current methodology: A fixed excise tax rate of 50% applies to all sweetened beverages, irrespective of sugar content.

New methodology: The revised methodology follows a tiered system as follows:

1. First tier: Sugar-free beverages containing only artificial sweeteners.

Excise tax: zero Saudi Riyal (SAR0) per liter

2. Second tier: Low sugar (less than 5 g of sugar per 100 ml)

Excise tax: SAR0 per liter

3. Third tier: Medium sugar (5 g to 7.99 g of sugar per 100 ml).

Excise tax: SAR0.79 per liter

4. Fourth tier: High sugar (8 g or more per 100 ml)

Excise tax: SAR1.09 per liter

Implications

Importers and businesses operating in Saudi Arabia should familiarize themselves with the new excise tax calculation methodology. Understanding these changes is crucial for compliance and to avoid unforeseen financial liabilities.

Companies importing sweetened beverages should analyze the sugar content of their products accurately. Providing precise sugar content data is essential for correct tax declarations under the new rules, as inaccuracies may disrupt supply chains and lead to compliance issues.