Starting January 2026, Saudi Arabia will make a big change in how sweetened drinks are taxed. Instead of charging the same 50% excise tax for all sugary drinks, the government will use a new system based on how much sugar is in each beverage. This new approach aims to encourage healthier choices and lower sugar consumption among consumers in the Kingdom.
The Gulf Cooperation Council (GCC) Financial and Economic Cooperation Committee approved this updated method. It will apply across all GCC countries, creating a unified system for sweetened beverage taxes. Saudi Arabia’s Zakat, Tax and Customs Authority (ZATCA) is responsible for implementing this new tax in the Kingdom.
How the New Tax System Works
The new system is called a tiered volumetric tax. This means the amount of tax a drink pays depends on how much sugar it contains per 100 milliliters. Drinks with higher sugar levels will face higher taxes, while drinks with lower sugar content will be taxed less.
This is different from the current system, which applies a flat 50% tax to all sweetened drinks, no matter how much sugar they contain. The change will cover ready-to-drink beverages, concentrates, powders, gels, extracts, and any products that can be turned into a drink.
By taxing drinks according to sugar content, the government hopes to reduce sugar consumption, improve public health, and encourage manufacturers to create healthier alternatives.
Impact on Consumers
For consumers, the new tax will likely make sugary drinks more expensive. Drinks with high sugar content may see price increases, while lower-sugar options could become more affordable. This pricing shift could influence buying habits, encouraging people to choose healthier drinks.
This change aligns with public health goals in Saudi Arabia and the GCC to fight obesity, diabetes, and other sugar-related health issues. People who regularly consume high-sugar beverages may notice the effect on their monthly expenses.
Impact on Businesses
Beverage manufacturers, importers, and retailers will need to make changes to comply with the new tax system. Companies may reformulate products to lower sugar content, adjust pricing strategies, and update labels to reflect the new tax rules.
ZATCA has already launched a public consultation through its platform called “Istitlaa.” Stakeholders have until October 23, 2025, to provide feedback and suggestions. This consultation will help authorities finalize the regulations and give businesses enough time to prepare.
Preparing for the Transition
To make the transition smooth, ZATCA plans to host awareness workshops with relevant agencies and businesses. These sessions will explain the technical requirements of the new tax system and help manufacturers understand how it will affect their products.
The government emphasizes that the goal is not only to collect taxes but also to improve public health. By giving businesses and consumers time to adjust, Saudi Arabia hopes to avoid confusion and ensure a smooth rollout of the new system.
Regional Coordination Across GCC
The new tax system is part of a broader GCC strategy to unify excise taxes on sweetened beverages. By having a consistent approach across member countries, businesses can operate more efficiently, and consumers will experience a fair and predictable pricing system.
Other GCC countries are expected to adopt similar measures in the future. This regional alignment also helps ensure that healthier choices are promoted across the Gulf, not just in Saudi Arabia.
Benefits of the Sugar-Based Tax
- Promotes Healthier Choices: Drinks with less sugar become more attractive, reducing overall sugar consumption.
- Encourages Product Innovation: Beverage companies may create lower-sugar alternatives to attract customers.
- Supports Public Health Goals: Helps combat obesity, diabetes, and other sugar-related diseases in Saudi Arabia.
- Creates Regional Consistency: Unified tax rules across GCC countries make business operations easier.
What Consumers Can Do
Consumers should be aware that prices of sugary drinks may increase. Choosing drinks with lower sugar content or sugar-free alternatives may save money and support healthier lifestyles. Paying attention to product labels will become more important, as the new tax depends on sugar content.
What Businesses Should Do
Businesses should:
- Review their product formulations and consider reducing sugar levels.
- Adjust pricing strategies to remain competitive under the new tax system.
- Ensure labels accurately show sugar content to comply with regulations.
- Participate in ZATCA workshops to understand technical and legal requirements.
By taking these steps early, businesses can stay ahead of the changes and maintain customer trust.
Timeline for Implementation
- Public Consultation: Until October 23, 2025. Feedback from stakeholders is encouraged.
- Awareness Workshops: Organized by ZATCA to clarify rules and requirements.
- Full Implementation: Expected January 1, 2026, after all legislative and regulatory steps are completed.
Businesses and consumers are encouraged to plan ahead to avoid surprises when the new system comes into effect.
