If you buy a bottle of soda or sweetened juice from the supermarket, you may notice that its price has increased. Why? Sweetened beverages tax, which is applied by the Zakat, Tax and Customs Authority (ZATCA) in Saudi Arabia. In this article, we explain everything about this tax: what its percentage is, which beverages it applies to, how it is calculated, and what it all means for the consumer and the merchant.
What is the sweetened beverages tax?
The sweetened beverages tax is an excise tax at a rate of 50% of the product price. Excise tax differs from value-added tax (15%) — this is an additional tax imposed on certain products harmful to health, to reduce their consumption and encourage people to make better choices.
Saudi Arabia first implemented the excise tax in 2017, but the sweetened beverages tax specifically became mandatory from December 2019. The Cabinet decision in this regard was issued in 2019, and since then, any beverage with added sugar or sweeteners is subject to a 50% tax.
Which beverages does the tax apply to?
The tax applies to any beverage containing added sugar or artificial sweeteners, whether:
- Carbonated drinks — Pepsi, 7Up, Sprite, and any other carbonated beverage
- Sweetened juices — fruit juices with added sugar
- Energy drinks — Red Bull, Power Horse (subject to a 100% tax)
- Sports drinks — Gatorade and others
- Ready-to-drink beverages — canned tea and coffee with sugar
- Concentrated syrups and powders — used to prepare beverages and require added sugar
Which products are exempt from the tax?
Certain products are exempt from the sweetened beverages tax based on the definition of “sweetened beverages” in the excise tax system:
- 100% natural juices without added sugar
- Milk and dairy products — fresh, canned milk, yogurt, and labneh
- Infant formula and baby milk
- Medicinal preparations — beverages intended for therapeutic use
- Water — bottled or otherwise (unless sugar or flavors are added)
How is the sweetened beverages tax calculated?
The calculation is simple: tax rate = 50% of the final product price to the consumer (before adding value-added tax).
Example:
A bottle of soda priced at 2 SAR
Sweetened beverages tax: 2 × 50% = 1 SAR
Value-added tax of 15% on (2 + 1): 3 × 15% = 0.45 SAR
Final price: 2 + 1 + 0.45 = 3.45 SAR
Who pays the tax?
The sweetened beverages tax is imposed on importers and local manufacturers, not directly on the consumer. The beverage company pays the tax to ZATCA when importing raw materials or manufacturing the product. However
Of course, the additional tax is ultimately reflected in the consumer price.
How to register for the tax on sweetened beverages?
If you are an importer or manufacturer of sweetened beverages, you must register with ZATCA and comply with the following:
- Register on the ZATCA electronic platform (zatca.gov.sa)
- Submit periodic tax returns (usually monthly)
- Pay the due tax on time
- Keep records and documents for at least 10 years
- Declare excise tax activities upon import or manufacturing
Delay or non-compliance exposes you to fines of up to 25% of the tax value for first offenses, doubling in case of repetition.
Frequently Asked Questions
Q: Do diet or zero-sugar products include the tax?
A: Yes, if the beverage contains artificial sweeteners instead of sugar, it is still considered a “sweetened beverage” and is subject to a 50% tax.
Q: What is the difference between excise tax and value-added tax?
A: Value-added tax (15%) is applied to most goods and services. Excise tax, however, focuses on specific products harmful to health. Both taxes apply cumulatively to the same product.
Q: If I buy a beverage abroad and bring it into Saudi Arabia, is it subject to tax?
A: Travelers may bring sweetened beverages for personal use within the allowed limits, but commercial companies must comply with the tax upon import.
Q: How do I report a tax violation?
A: You can report to ZATCA via the website or the ZATCA app, and you may receive a reward of up to 2.5% of the fine, with a maximum of one million riyals.
Conclusion
The 50% tax on sweetened beverages in Saudi Arabia aims to reduce the consumption of unhealthy beverages and increase government revenues to support healthcare programs. As a consumer, you will notice the price difference on carbonated drinks and sweetened juices. As a trader or importer, you must register and comply with the ZATCA system to avoid fines. For inquiries: Unified number 19993 or zatca.gov.sa.
