Excise tax in Saudi Arabia does not touch most businesses at all — and that is exactly what makes it dangerous for the ones it does touch. Unlike VAT, which applies broadly at 15% across almost every supply, excise tax is narrow, aggressive, and easy to get wrong precisely because so few finance teams deal with it regularly. If your business imports, produces, or stores tobacco, energy drinks, sweetened beverages, or e-smoking products, the rate is not 15% — it is 50% or 100%, and it lands before VAT is even calculated.
This article sets out what excise tax actually covers, the current rates, who has to register, and where the rules have just changed in a way that catches even experienced teams off guard.
What Is Excise Tax, and Where Does It Come From?
Excise tax is a selective tax on specific goods considered harmful to health or the environment — the Kingdom introduced it in June 2017 under the GCC Unified Agreement for Excise Tax, the same regional framework that underpins VAT. It is a single-stage tax: it is charged once, when excise goods are imported, produced, or released from a tax warehouse for consumption — not on every transaction down the supply chain the way VAT is.
The person who pays ZATCA is the importer, producer, or warehouse keeper. The person who actually bears the cost is the end consumer, because the tax is built into the retail price before VAT is applied on top. That stacking is exactly why excise goods carry such a heavy combined tax burden — a product taxed at 100% excise effectively doubles in pre-VAT cost before the 15% VAT is even added.
What’s Taxed, and at What Rate
ZATCA’s excise regime covers a defined list of goods, each with its own rate. Most of the list has stayed stable since 2019 — the one meaningful change sits in the sweetened beverages category, covered separately below.
| Category | Definition | Rate |
|---|---|---|
| Tobacco products | All items under Chapter 24 of the GCC unified customs tariff | 100% |
| Energy drinks | Beverages marketed as energy drinks containing stimulants such as caffeine, taurine, ginseng, or guarana, plus their concentrates and powders | 100% |
| Electronic smoking devices | E-smoking devices and similar tools, per GCC tariff schedules | 100% |
| Electronic smoking liquids | Liquids used in e-smoking devices, with or without nicotine | 100% |
| Soft drinks | All carbonated beverages other than unflavoured carbonated water, plus concentrates and powders that convert into soft drinks | 50% |
| Sweetened beverages | Any product with added sugar or other sweeteners, produced to be consumed as a beverage — ready-to-drink or concentrate | See below |
Three exemptions apply specifically to the sweetened beverages category: 100% natural juices with no added sweeteners, milk-based drinks with at least 75% milk content, and plant-based milk alternatives that meet ZATCA’s nutritional criteria. None of the other categories carry equivalent carve-outs — a product either falls inside tobacco, energy drinks, or e-smoking liquids/devices, or it doesn’t.
The 2026 Change to Sweetened Beverages
Until the end of 2025, sweetened beverages carried the same flat 50% rate as soft drinks. Effective 1 January 2026, that flat rate was replaced with a four-tier system that prices the tax on the actual sugar content of the drink, rather than a single blanket percentage:
- Tier 1 — artificial sweeteners only, no added sugar: zero excise tax
- Tier 2 — under 5g of sugar per 100ml: zero excise tax
- Tier 3 — 5g to 7.99g of sugar per 100ml: SAR 0.79 per litre
- Tier 4 — 8g or more of sugar per 100ml: SAR 1.09 per litre
The shift is deliberate policy, not a technical tweak — it is a public-health-driven move to reward lower-sugar formulations rather than tax every sweetened drink identically, and it applies across carbonated beverages, flavoured waters, and sugar-sweetened energy drinks alike.
The four-tier structure above is confirmed by an official Saudi Press Agency government announcement and corroborated by multiple international tax trackers as taking effect 1 January 2026. However, as of the time of writing, ZATCA’s own published “Goods Subject to Excise Tax” reference page still describes the sweetened beverages category at the old flat 50% rate — it does not yet visibly reflect the tiered structure. If you are pricing or filing against this category, confirm the currently published rate directly on ZATCA’s site or through your customs/excise advisor before relying on either figure for a live filing.
Registration and Filing
If your business imports, produces, or operates a tax warehouse for any excise good, you are required to register with ZATCA before undertaking that activity — there is no threshold to wait past. Excise tax registration is tied to the activity itself, not to a revenue or volume figure the way VAT registration is.
Once registered, excise tax returns are filed bi-monthly — every two months, rather than monthly or quarterly like VAT. Each return declares the excise goods imported, produced, or released for consumption during that period, and the tax due is settled against it. Missing a bi-monthly cycle does not just create a late return; because the tax is calculated on the retail-ready value of goods already in market, correcting it retroactively is materially harder than correcting a VAT return.
A Jeddah-based distributor imports a shipment of energy drinks with a customs value equivalent to SAR 200,000. At the 100% excise rate, SAR 200,000 of excise tax is due on that shipment before it clears for local sale — on top of which 15% VAT is then charged on the VAT-inclusive value (goods value plus excise). The excise cost alone doubles the pre-VAT landed cost of the shipment, which is exactly why excise goods carry retail prices so far above their production cost.
Where Businesses Get This Wrong
Most excise tax problems are not disputes over the law — they are classification and timing errors that compound quietly until an audit surfaces them.
- Treating “soft drinks” and “sweetened beverages” as one category. They are defined differently — soft drinks by carbonation, sweetened beverages by added sugar content — and a single product can technically sit inside both definitions. Get the classification wrong and you risk applying the wrong rate entirely.
- Applying the old flat 50% rate to sweetened beverages by default. Given the ZATCA publication lag described above, it is easy to default to the familiar 50% figure rather than checking whether the 2026 tiered structure applies to a specific product’s sugar content.
- Missing the bi-monthly filing rhythm. Businesses that also handle VAT and CIT often mentally default to monthly or quarterly cycles — excise’s two-month cadence is easy to miss if it is not separately diarised.
- Failing to document exemption eligibility. Claiming the natural juice, milk-content, or plant-based milk exemption without retaining the product composition evidence to support it is a common audit finding.
Frequently Asked Questions
Tobacco products, energy drinks, electronic smoking devices, electronic smoking liquids, soft drinks, and sweetened beverages. Tobacco, energy drinks, and e-smoking devices/liquids are taxed at 100%; soft drinks at 50%; sweetened beverages follow the rate structure described above.
100%, applied to all items falling under Chapter 24 of the GCC unified customs tariff. This is charged once, when the goods are imported, produced, or released for consumption.
Yes — effective 1 January 2026, the flat 50% rate was replaced with a four-tier system based on sugar content per 100ml, ranging from zero tax for no/low-sugar drinks to SAR 1.09 per litre for drinks with 8g or more of sugar per 100ml. Confirm the currently published rate with ZATCA before filing, given a publication lag on their reference page.
Importers, producers, and warehouse keepers of excise goods must register with ZATCA before undertaking that activity. They remit the tax to ZATCA, but the cost is passed on to consumers through the retail price.
Bi-monthly — once every two months. This is a different cadence from VAT, which is typically filed monthly or quarterly, so it needs its own place on the compliance calendar.
100% natural juices with no added sweeteners are exempt from the sweetened beverages category, along with milk-based drinks containing at least 75% milk and qualifying plant-based milk alternatives. The exemption depends on the product’s actual composition, not its marketing.
- Excise tax is a single-stage, high-rate tax on tobacco (100%), energy drinks (100%), e-smoking devices and liquids (100%), soft drinks (50%), and sweetened beverages, introduced in June 2017 under the GCC Unified Agreement.
- Since 1 January 2026, sweetened beverages have moved from a flat 50% rate to a four-tier sugar-based structure — zero tax for no/low-sugar drinks, up to SAR 1.09 per litre for the highest sugar tier.
- ZATCA’s own published goods list has not yet been updated to reflect this change — confirm the current rate before relying on either figure for a live filing.
- Registration is tied to the activity (import, production, or warehousing of excise goods), not to a revenue threshold, and returns are filed bi-monthly.
- The most common errors are classification mistakes between soft drinks and sweetened beverages, and missing the two-month filing cadence.
This article is based on ZATCA’s published Excise Tax rules and the GCC Unified Agreement for Excise Tax, together with the Saudi Press Agency’s official announcement of the sweetened beverages rate change effective 1 January 2026. It is provided for general information only and does not constitute tax or legal advice. Given a lag in ZATCA’s own published rate reference for sweetened beverages, confirm current rates directly with ZATCA before relying on this article for a live filing. dariba.co is an independent platform with no consulting relationships.