Saudi’s new sugary drinks tax won’t impact FMCG supply chains: KPMG

The 50% excise tax on sugar sweetened beverages (SSBs), which came into effect from December 2019, will not impact FMCG supply chains, including manufacturers, wholesalers, retailers, and the hospitality industry in the long term, according to Nick Soverall, head of indirect tax at KPMG in Saudi Arabia.

“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 behavior are expected to stabilize over time, as manufacturers are likely to switch production to different beverages.

However, KPMG expected some of the entities specialized in the production and distribution of SSBs to face difficulties in classifying products for excise purposes.

“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 said, noting the General Authority of Zakat and Tax (GAZT) is expected to publish a list of products that will be included in the excise regime to provide further clarity.

Given the first tax submission deadline for companies is January 15, 2020, KPMG said it is urgent to bring clarity to the changes in compliance for producers, importers, wholesalers and retailers.

In December 2019, the Kingdom’s budget 2020 projected total tax collection on goods and services at SAR 142 billion, 0.8% higher than the 2019 estimates, on the back of strong economic recovery and the implementation of the SSB tax.