Starting 1 January 2026, ZATCA's amended Excise Tax Implementing Regulations changed how excise tax is calculated on sweetened beverages. Under this amended methodology, how does the excise tax on a sweetened beverage now compare with the excise tax mechanism that continues to apply to tobacco products and energy drinks?
- Sweetened beverages are now taxed on a graduated basis tied to their total sugar content per 100ml (with distinct brackets from no/low sugar up to higher sugar levels), whereas tobacco products and energy drinks continue to be taxed as a flat percentage of the retail price regardless of composition
- All three categories, sweetened beverages, tobacco, and energy drinks, are now taxed identically on a sugar-content basis, since the 2026 amendment unified the excise methodology across every excisable product
- Sweetened beverages became entirely excise-exempt from 1 January 2026, while tobacco and energy drinks remain taxed as a flat percentage of retail price as before
- The 2026 change only affected the registration and reporting deadlines for excise taxpayers selling sweetened beverages; the underlying flat-percentage-of-retail-price calculation method for sweetened beverages itself did not change
Why A? And why not the others?
Correct answer: A. Sweetened beverages are now taxed on a graduated basis tied to their total sugar content per 100ml (with distinct brackets from no/low sugar up to higher sugar levels), whereas tobacco products and energy drinks continue to be taxed as a flat percentage of the retail price regardless of composition
From 1 January 2026, ZATCA's amended Executive Regulations moved sweetened beverages away from a flat percentage-of-retail-price calculation to a graduated, sugar-content-based methodology, sorting drinks into brackets (for example, no-sugar/artificially sweetened, low-sugar, medium-sugar, and higher-sugar tiers) based on grams of sugar per 100 millilitres, so that more heavily sweetened drinks bear a higher effective tax than lightly sweetened ones. Tobacco products and energy drinks were not part of this change and continue to be taxed as a flat percentage of their retail price. The option claiming all three categories were unified onto a sugar-content basis is wrong because the amendment specifically targeted sweetened beverages, leaving tobacco and energy drinks on the pre-existing flat-rate method. The option describing sweetened beverages as now excise-exempt is wrong; they remain taxable, just under a different, sugar-based calculation rather than being removed from the excise net. The option limiting the 2026 change to administrative deadlines is wrong because the substantive change was to the calculation method itself, not merely to filing or registration timelines.
Source: ZATCA Executive Regulations of the Excise Tax Law, amendments effective 1 January 2026 (sugar-content-based methodology for sweetened beverages)