Saudi Arabia is set to fundamentally change how it taxes sweet beverages, marking a pivotal step in its public health and economic strategy. Starting January 1, 2026, the Kingdom will replace its current flat-rate tax with a sophisticated tiered volumetric system.
Saudi Arabia sugar tax overhaul 2026
The upcoming tax system completely overhauls the previous selective tax method that was implemented since 2017. Previously, the Zakat, Tax and Customs Authority (ZATCA) applied a flat-rate 50% selective tax on the retail price of
all
sweetened beverages, regardless of their sugar content. This meant a lightly sweetened drink was taxed just as heavily as a sugar-heavy soda. (Note: Energy drinks continue to have a 100% tax rate).The New Rule (Effective Jan 1, 2026), will now be determined by the grams of sugar per 100 milliliters (ml) of the ready-to-drink product. This tiered volumetric approach makes the tax proportional to the sugar content, creating a massive financial incentive for manufacturers to reformulate their recipes.This new methodology, adopted by the GCC’s Financial and Economic Cooperation Committee, aims to strike a necessary balance between health policy and industry innovation. As Minister of Industry and Mineral Resources Bandar Alkhorayef stated, the goal is to both preserve public health by reducing sugar consumption and give the industry space to innovate and develop products with lower sugar levels.
Saudi Arabia’s tiered sugar tax rates
The new system defines four distinct tax tiers, which determine the excise tax paid per liter of beverage. This clear structure rewards low-sugar content with lower (or zero) tax burdens:
| Sugar Content Per 100 ml | Tax Tier | Excise Tax Rate (Per Liter) | Status & Incentive |
| 0g (Artificial Sweeteners Only) | Tier 1 | SR 0 | Tax Exempt: Rewards sugar-free production. |
| Less than 5g | Tier 2 | SR 0 | Tax Exempt: Rewards low-sugar formulation. |
| 5g to 7.99g | Tier 3 | SR 0.79 | Moderate Tax: Applies to medium-sugar drinks. |
| 8g or more | Tier 4 | SR 1.09 | Highest Levy: Applies to high-sugar drinks (e.g., many sodas). |
For beverage producers, the stakes are clear: reducing sugar content just enough to cross a threshold, for instance, from 8g/100ml (Tier 4) down to 7.9g/100ml (Tier 3), will result in a substantial tax saving of SR 0.30 per liter on that product.
Definitions and exemptions
The new selective tax is comprehensive, but it includes essential health- and diet-related exemptions, offering clarity for consumers and manufacturers.Products Subject to the Tax:The term “Sweetened Beverages” is broadly defined by ZATCA as any product to which a source of sugar, artificial sweeteners, or other sweetening agents have been added, and which is produced for consumption as a beverage.This includes:
- Ready-to-drink beverages (sodas, iced teas, flavored water).
- Concentrates.
- Powders, gels, and extracts.
- Any form that can be converted into a drink.
Key Beverages Exempted from the Tax:In recognition of their nutritional value, certain beverages are excluded from this selective tax:
- Milk & Dairy: Beverages that contain 75% or more of milk/dairy products (including animal milk and plant-based alternatives like soy syrup).
- Natural Juices: 100% natural fruit and vegetable juices to which no source of sugar or artificial sweetener has been added.
- Medical Products: Special purpose medical beverages.
The implementation of this policy by ZATCA will involve awareness workshops and required product testing, mandating that importers and manufacturers provide certified lab reports to ensure proper classification before the January 2026 rollout.
