Excise Tax Amendments Introduce Sugar-Based Methodology For Beverages, Effective January 1 2026

The Zakat, Tax and Customs Authority Board of Directors has approved changes to parts of the Executive Regulations of the Excise Tax Law. The amendments include a new way of calculating excise tax on sweetened beverages, which will be based on their total sugar content.

Under the revised system, tax on sweetened beverages will depend on graduated tiers. These tiers are linked to how much total sugar there is in every 100 millilitres of each ready-to-drink beverage, with the applicable tax rate set inside each defined tier.

This approach replaces the current method, which applies a fixed excise rate of 50% of the retail selling price for all taxable sweetened beverages. By moving away from a single percentage, the new system makes the tax level more closely tied to the actual sugar content.

Sweetened beverages are described in the regulations as any product made for consumption as a drink, where sugar or other sweeteners are added. This wide definition includes ready-to-drink products, as well as concentrates, powders, gels, extracts, and similar forms that can be turned into beverages.

The key differences between the current and new excise tax calculation methods are shown below.

ZATCA stated that calculating excise tax on sweetened beverages using total sugar content is intended to support public health goals and reduce sugar intake. The Authority aims to encourage producers and importers to supply products with less sugar, in line with international practices applied in many other markets.

The introduction of this sugar-based methodology follows a decision by the Financial and Economic Cooperation Committee of the Gulf Cooperation Council countries. The Committee agreed to use a graduated volumetric approach for calculating excise tax on sweetened beverages, with tax determined according to total sugar content.

With inputs from SPA