Riyadh – Mubasher: Imposing a 50% excise tax on Sugar-Sweetened Beverages (SSBs) will have a short-term impact on the FMCG supply chain in Saudi Arabia, including manufacturers, wholesalers, retailers and the hospitality industry, according to KPMG.

“The new SSB tax will affect consumption and production in the short- to medium-term due to the lower consumption of sweetened beverages,” he said, adding that effects on customer behaviour are expected to stabilize over time, as manufacturers may switch production to different beverages,” said Nick Soverall, Head of Indirect Tax at KPMG in Saudi Arabia.

A sweetened beverage has been classified by GAZT as any product containing any type of sugar or other sweeteners ‎produced for the purposes of drinking as a beverage whether ready for drinking, or as concentrate ‎powders, gel extracts or any form that can be converted into a drink’ with the exception of certain 100% fruit or vegetable juices and milk and dairy products.

“As the definition is kept rather wide and generic, there are some potential issues faced by the industry in terms of product classification for tax excise purposes,” Soverall commented.

The accounting firm expects some entities specialized in the production and distribution of SSBs could face difficulties in classifying products for excise purposes, as per a recent research note.

The Saudi General Authority for Zakat and Tax (GAZT) approved in May amendments to existing regulations, including a 100% tax on tobacco and its by-products and energy drinks, as well as a 50% tax on soft and sugary drinks.

GAZT is expected to publish a list of products that will be included in the excise regime to provide more clarity.

Meanwhile, the Saudi public budget 2020 estimates SAR 142 billion in total taxes on goods and services, 0.8% higher than last year’s estimates.