The Federal Tax Authority (FTA) has issued Decision No. 11 of 2025, introducing additional cases where Excise Tax already paid on excise goods may be deducted, along with specific controls and conditions for claiming such deductions.
This Decision is effective from 1 January 2026 and is particularly relevant for manufacturers, warehouse keepers, and businesses dealing in excise goods, especially sweetened drinks and goods stored in designated zones.
Enhanced Flexibility in Tax Deductions
The Decision supplements Article 16(1)(d) of the Excise Tax Law (Federal Decree-Law No. 7 of 2017) by recognising two additional cases where Excise Tax paid may be deducted by a taxable person.
Excise Goods Removed from Designated Zones for Inspection of Permissible Natural Shortage
Excise Tax may be deducted where:
- Excise goods are removed from a designated zone.
- Removal is solely for inspection.
- The purpose is to determine permissible natural shortage.
Excess Excise Tax Paid on Sweetened Drinks
Deduction of excess paid Excise Tax is also permitted where:
- Sweetened drinks were declared and taxed under the High-Sugar Category
- Excise Tax was paid accordingly
- A Laboratory Report subsequently establishes that:
- The sugar and other sweetener content falls under a Lower-Sugar category; or
- The drink is not subject to Excise Tax.
This deduction applies only to tax periods commencing on or after 1 January 2026 and ending on or before 30 June 2026.
Controls and Conditions for Deduction
The FTA has prescribed strict controls to prevent misuse of the deduction mechanism.
Controls for Natural Shortage-Related Deductions
To claim deduction:
- Excise Goods sample must be removed exclusively for inspection by the Independent Competent Entity.
- Inspection is to determine the percentage of the Natural Shortage.
- Goods damaged during inspection.
- Goods became irrecoverable and incapable of being returned to the designated zone
- The taxable person or warehouse keeper must retain official evidence issued by the Independent Competent Entity confirming:
- Quantity of Excise Goods removed.
- Purpose of removal to determining the percentage of Natural Shortage.
- Damage and irrecoverability of Excise Goods.
Controls for Sweetened Drinks Reclassification – For excess tax paid on sweetened drinks:
- The goods must not have been sold before the right to deduction arose.
- The taxable person must submit the documentary evidence:
- Laboratory Report by an accredited laboratory subsequently confirms that:
- the sugar content falls below the High-Sugar category; or
- the drink is not subject to Excise Tax.
- Copy of the original excise tax return showing payment under High-Sugar Category.
- Evidence proving that the goods were not sold before the right to deduction arose.
Conclusion
Federal Tax Authority Decision No. 11 of 2025 provides a limited and controlled extension to the Excise Tax deduction framework, permitting relief in clearly defined cases of regulatory inspection losses and excess tax paid due to sweetened drink reclassification. Such relief is strictly subject to prescribed conditions and documentary compliance.
Stay ahead of the change.
Team of Experts at RVG can help you review your compliance procedures before the amendments take effect on 1 January 2026.
📩 Connect with RVG today to ensure a smooth transition.
