G/MA/W/137  
 
25 April 2018  
(18-2620) Page: 1/3 
Committee on Market Access  Original: English  
 
 REPLIES BY THE KINGDOM OF SA UDIA ARABIA TO THE Q UESTIONS  POSED BY 
SWITZERLAND REGARDING THE 2017 L EGISLATION ON EXCISE  TAX  
(G/MA/W/132)  
COMMUNICATION FROM T HE KINGDOM OF SAUDI ARABIA  
The following communication, dated 24 April 2018, is being circulated at the request of the 
delegation of the Kingdom of Saudi Arabia.  
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1. Could Saudi  Arabia  share  it’s asses sment on  the cons istency of the excise  tax and 
its modalities with its legal obligatio ns under the  WTO?  
Response:  
The excise T ax is implemented under the decision of the GCC Supreme Counci l and the provisions  
of the GCC Common  Agreement  on Excise  Tax as well as under the relevant national law and 
by-law. It is im posed on all carbonated and energy drinks regardless if they are locally produced or 
imported as it is clearly laid down in Article (2) of the above -mentioned Common Agreement. 
Therefore, the Tax system is consistent with GATT Article  III (Natio nal Treatment  ). 
The Excise  Tax does not intend  to protect local industry  of like produc ts and therefore  it is consistent  
with GATT  Article III paragraph  1. 
The Excise Tax is not applied to imported like products with higher rate than that imposed  to local 
like products.  Therefore,  it consists  with GATT  Article III paragraph  2. 
The Excise Tax is not used to provide any preferential treatment to local like products to conform 
with GATT Article III paragraph 4.  
2. Could Saudi Arabia confirm that the taxes referred to above are aimed at reducing 
the consumption of products containing s ugar, notably in view of decreasing the 
prevalence of diabetes and obesity?  
Response:  
The Excise Tax was adopted with the aim of protecting human health and environment as it is 
stated out in Article (3) of the above -mentioned Common Agreement.  
The Excise tax is imposed on selective goods containing components that are deemed harmful to 
human health or the environment, products containing sugar as well as the combination of other 
components that are deemed harmful to human health are targeted through the Ex cise Tax.  
3. Could Saudi Arabia indicate which criteria have been used to select and define the 
products subject to the excise tax, i.e. "goods that are deemed harmful to human 
health and to the environment "? G/MA/W/137  
 
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  Response:  
The Excise  tax is impose  d on selective goods  and is based  on the combinat ion of the product’s  
ingredie nts that are deemed  harmful  to human  health  and to the environment.  
4. Could Saudi Arabia indicate the reasons wh y it has chosen to impose an 
ad valorem  excise tax instead of a specific tax based on the volume or on the 
content of relevant ingredients as recommended by the World Health 
Organization?  
Response:  
While the objective of the Excise Tax is to prevent possible harm to human health, the ad valorem  
excise tax impacts better on the consumption of the product because when production, prices or 
consumption increase the amount paid in taxes rises which is a tool that contributes to the 
reduction of consumption of such products.  
5. Could Saudi Arabia detail  which criteria have been applied to determine the level 
of the tax?  
Response:  
The difference of the components of the product remains the criteria on which the level of the tax 
is determined. The GCC Member States are convinced that the components of Ener gy drinks could 
have more possible impact on the human health than those of the soft sweetened drinks. 
Therefore, the GCC Member States have agreed to impose excise tax rates of 50% on soft drinks, 
and 100% on energy drinks.  
6. Could Saudi Arabia explain the reasons why the tax on energy drinks (100%) has 
been set at twice the level of that for soft drinks (50%), whereas the sugar 
content is similar in both categories of products?  
Response:  
The component of the two product are different. In addition to sugar, energy drinks contain other 
ingredients (such as caffeine , taurine, etc.), which justify the differentiation of the level of the 
excise tax.  
7. Could Saudi Arabia elaborate on the tax suspension in regard of locally produced 
selective commodities?  
Response:  
Regarding Tax Suspension, it is worth noting that the provisions of both A rticles 5 and 6 of the 
Excise Tax on Goods Implementing Regulation should be read in conjunction.  
"Article 5:  
Selective goods are deemed available for consumption and are therefore ta xable in the following 
cases:  
1. Imports of selective goods unless they are in a suspended tax position.  
2. Production of selective goods outside of tax -suspension status.  
Article (6) of the Saudi by Law of the excise tax Law state out that excise tax on s elective goods 
shall be suspended in the following two cases:  
a) Production of selective goods, transformation, possession, storage or receipt of locally 
produced selective goods by the licensee.  
b) Transfer of selective goods in any of the following cases:  G/MA/W/137  
 
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  i. From a tax warehouse in the Kingdom to another tax wareho use in the Kingdom;  
ii. From a tax warehouse in the Kingdom to a tax warehouse in any Membe r State;  
iii. From a tax warehouse in any member country to a tax warehouse in the Kingdom;  
iv. From a tax warehouse in the Kingdom or in any Member State outside the GCC Region 
for export - or re -export in accordance with the provisions of the unified customs 
law(s); and  
v. Upon importation to a tax warehouse in the Kingdom or any Member State. " 
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