The Saudi Excise Tax Law, enforced by the Zakat, Tax and Customs Authority (ZATCA), imposes specific excise tax rates on goods deemed harmful to public health and the environment. Corporate taxpayers importing, producing, or distributing these goods must understand the applicable tax rates, compliance obligations, and reporting requirements to avoid penalties.
📜 Overview of Excise Tax in Saudi Arabia
Excise tax is an indirect tax levied on the sale or production of particular goods. In Saudi Arabia, the tax primarily targets products that are linked to health concerns, such as:
- Tobacco products and derivatives
- Energy drinks
- Carbonated (soft) drinks
This tax is paid by producers and importers but is typically passed on to the end consumer through higher retail prices.
📊 Current Excise Tax Rates (As of 2025)
| Product Category | Tax Rate | Examples |
|---|---|---|
| Tobacco & Tobacco Products | 100% | Cigarettes, cigars, loose tobacco, shisha products |
| Energy Drinks | 100% | Beverages containing stimulant substances like caffeine, taurine |
| Soft Drinks (Carbonated Beverages) | 50% | Soda, flavored sparkling water, and other fizzy beverages |
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📌 Compliance Requirements for Corporate Taxpayers
- Register with ZATCA as an excise taxpayer before producing or importing excise goods.
- File periodic excise tax returns (monthly or quarterly depending on turnover).
- Maintain accurate records of production, imports, sales, and inventory.
- Affix excise tax digital stamps (where applicable) before goods enter the market.
💡 Impact on Businesses
These tax rates significantly increase the cost of the taxed products, which can impact:
- Pricing strategies – Businesses must factor excise tax into retail pricing.
- Consumer demand – Higher prices may reduce consumption volumes.
- Cash flow – Taxes must often be paid upfront upon import or production.
⚠️ Penalties for Non-Compliance
Failure to comply with excise tax regulations can result in:
- Seizure and destruction of non-compliant goods.
- Monetary fines based on unpaid tax amounts.
- Revocation of excise tax registration.
🏁 Conclusion
The excise tax rates of 100% on tobacco and energy drinks, and 50% on soft drinks are designed to discourage consumption and promote public health. Corporate taxpayers must remain compliant by registering, filing returns, and maintaining accurate records to avoid penalties. Proper tax planning can help minimize the business impact while ensuring regulatory compliance.
