What are selective goods tax?
Selective goods tax is an indirect tax imposed on certain types of goods that harm public health or the environment. In Saudi Arabia, the selective goods tax was implemented on June 11, 2017, and is supervised by the Zakat, Tax and Customs Authority (ZATCA). The aim of this tax is to reduce the consumption of harmful products and generate additional revenue for the state to support public services.
What goods are subject to the tax?
The following three main types of goods are subject to selective goods tax in Saudi Arabia at varying rates:
- Tobacco and its products – at a rate of 100% (such as cigarettes, moassel, electronic cigarettes)
- Energy drinks – at a rate of 100%
- Carbonated drinks – at a rate of 50%
Illustrative example: If the price of a pack of cigarettes is 20 riyals, a selective tax of 20 riyals is added, making the final price 40 riyals before value-added tax.
Who is responsible for paying the tax?
The primary responsibility lies with:
- Local manufacturers – when producing selective goods within Saudi Arabia
- Importers – when importing these goods from abroad
The final consumer bears the actual cost, as the tax is added to the product price.
How to register for selective goods tax?
Manufacturers and importers of selective goods must register with the Zakat, Tax and Customs Authority upon commencing business. The registration steps are simple:
- Visit the Zakat, Tax and Customs Authority portal (zatca.gov.sa)
- Log in using a unified national access account (Absher)
- Select “Register for Selective Goods Tax” from the services menu
- Fill in the establishment and goods data (produced or imported)
- Submit the application and wait for approval
Delaying registration or failure to register exposes violators to financial penalties of up to 50% of the tax due.
How is the tax calculated and declared?
Selective goods tax returns are submitted monthly via the ZATCA portal. The return includes:
- Quantity of goods produced or imported during the month
- Calculated tax amount (price × tax rate)
- Total tax due
Example: If a company imports 1,000 cans of energy drinks at 10 riyals per can, the tax = 1,000 × 10 × 100% = 10,000 riyals.
What are the penalties for violation?
- Tax evasion penalties
- Confiscation of smuggled goods
- Prohibition of import or export in some cases
Difference between Selective Tax and Value Added Tax
Many people confuse the two taxes, and this is an explanation of the difference:
Value Added Tax (15%): Applies to most goods and services, paid by the final consumer, and deducted from business inputs.
Selective Goods Tax: Applies to specific goods (tobacco, energy, soft drinks), with high rates (50-100%), and is not deductible.
In clearer terms: Selective tax is added on top of value-added tax. Cigarettes are subject to 100% selective tax + 15% VAT on the total.
Frequently Asked Questions
Q: Does the tax include electronic cigarettes?
A: Yes, all tobacco products, including electronic cigarettes and molasses, are subject to a 100% tax.
Q: Does this apply to imported energy drinks?
A: Yes, any energy drink imported into Saudi Arabia is subject to a 100% tax at the customs port of entry.
Q: Are diet sodas exempt?
A: No, diet and zero sodas are subject to the same 50% rate. Exemption applies only to beverages that are completely free of sugar and gas.
Q: What if I am an individual consumer and not engaged in commercial activity?
A: You do not need to register or file. The tax is included in the price of the product you purchase.
Q: Are there exemptions from selective goods tax?
A: Some goods may be exempt if they are for medical or industrial purposes, but the exemption is very limited and requires official approval from the Authority.
For more information, visit the official website of the Zakat, Tax and Customs Authority: zatca.gov.sa
