FTA Decision No. 11 of 2025 (issued 12 December 2025, effective 1 January 2026) introduces two additional cases where excise tax paid on excise goods may be deducted under Article 16(1)(d) of Federal Decree-Law No. 7 of 2017 — and sets strict documentary controls for each. The two cases are: tax paid on excise goods removed from a Designated Zone for natural shortage inspection purposes; and tax paid in excess on sweetened drinks incorrectly classified under the High-Sugar Category. Abdelhamid & Co (FTA TAAN 20033908) assists Designated Zone operators, Warehouse Keepers, and sweetened drink importers in meeting the controls and preparing the required documentation for these deductions.
Legal Basis and Background
FTA Decision No. 11 of 2025 was issued by the Chairman of the FTA Board of Directors under Article 16(1)(d) of Federal Decree-Law No. 7 of 2017, which authorises the FTA to determine additional deduction cases beyond the three statutory cases in Articles 16(1)(a)–(c). The Decision references FTA Decision No. 6 of 2025 on Natural Shortage and Cabinet Decision No. 197 of 2025 on Excise Goods, reflecting that both these instruments create factual situations where previously paid excise tax should be recoverable through deduction rather than the standard refund process.
Additional Case 1 — Natural Shortage Inspection Samples (Article 2, Clause 1)
Article 2(1) of FTA Decision No. 11 of 2025 creates a deduction right for excise tax paid on goods removed from a Designated Zone for the specific purpose of inspection by an Independent Competent Entity to determine the permissible Natural Shortage percentage, under Article 2 Clauses 3 and 9 of FTA Decision No. 6 of 2025. When a sample of excise goods is extracted from a Designated Zone for this inspection process and the sample is damaged and becomes irrecoverable during inspection, the tax that was paid when those goods entered the zone (or were produced in the zone) can be deducted.
The rationale is straightforward: the goods never reached the consumer and were permanently destroyed in a controlled inspection process. Requiring the Warehouse Keeper or taxable person to bear the full tax cost of goods destroyed in the process of meeting FTA compliance requirements would be inequitable. The deduction ensures that only goods actually released for consumption bear the final tax burden.
Controls for Case 1 — Article 3, Clause 1
Three conditions must all be satisfied for the Case 1 deduction to apply:
- The removal of the excise goods sample from the Designated Zone must be exclusively for inspection by the Independent Competent Entity to determine the Natural Shortage percentage — as part of the inspection of the production and storage process under FTA Decision No. 6 of 2025, Clauses 3 and 9 of Article 2
- The sample must have been damaged during the inspection and become irrecoverable and consequently unable to be returned to the Designated Zone
- The Warehouse Keeper or taxable person must retain, and submit when requesting the deduction, evidence from the Independent Competent Entity that includes: the quantity of excise goods removed from the zone; confirmation that removal was for the purpose of determining the Natural Shortage percentage; and confirmation that the goods were damaged during inspection and became irrecoverable
Additional Case 2 — Over-Taxed Sweetened Drinks (Article 2, Clause 2)
Article 2(2) of FTA Decision No. 11 of 2025 creates a deduction right specifically for the transition period following the introduction of the tiered sweetened drink tax structure under Cabinet Decision No. 197 of 2025. Where a taxable person paid excise tax on sweetened drinks at the High-Sugar Category rate (AED 1.09 per litre) — because no Laboratory Report was available at the time — and subsequently obtains a Laboratory Report proving the drink falls under a lower tax category or is not subject to tax at all, the over-paid tax can be deducted for tax periods commencing on or after 1 January 2026 and ending on or before 30 June 2026.
This is a transitional relief measure. Article 13(4) of Cabinet Decision No. 197 of 2025 requires importers to submit a Laboratory Report proving the drink's sugar content; without this report, the FTA applies the High-Sugar rate. The 1 January–30 June 2026 deduction window allows businesses time to obtain their laboratory reports and recover any over-paid tax for that initial six-month period.
Controls for Case 2 — Article 3, Clause 2
Four conditions must all be satisfied for the Case 2 deduction:
- The taxable person must not have sold the sweetened drinks before the date on which the right to deduction arose (the date the qualifying Laboratory Report was accepted)
- The Laboratory Report must prove that the sugar content is below the High-Sugar Category or that the drink is not subject to tax at all
- A copy of the previously submitted declaration on the FTA's system confirming that tax was paid at the High-Sugar Category rate must be provided
- Evidence proving that the goods subject to the deduction were not sold before the time at which the right to deduction arose must be submitted
The "not sold" condition is the most practically challenging: it means the deduction applies only to unsold stock at the time the correcting laboratory report is submitted. A business that had already sold the higher-taxed sweetened drinks before obtaining the laboratory report cannot claim the deduction for those sold units. This underlines the importance of obtaining laboratory reports as early as possible in 2026.
How These Deductions Interact with FTA Decision No. 6 of 2025
FTA Decision No. 11 of 2025 directly references and builds upon FTA Decision No. 6 of 2025 (on Natural Shortage). Decision No. 6 requires Warehouse Keepers and taxable persons to obtain Reports from approved Independent Competent Entities certifying the permissible Natural Shortage percentage for each excise good. Decision No. 11 creates the tax deduction mechanism that makes the Decision No. 6 inspection process commercially viable — without the deduction, the tax cost of goods destroyed during mandatory inspection would fall entirely on the Warehouse Keeper.
Why Choose Abdelhamid & Co
We assist Designated Zone operators in coordinating the natural shortage inspection process under FTA Decision No. 6 of 2025 and in preparing the evidence package required for the Case 1 deduction under FTA Decision No. 11. For sweetened drink importers, we provide laboratory report sourcing guidance, Case 2 deduction preparation, and compliance review to identify the eligible unsold stock as of the deduction trigger date.
Frequently Asked Questions
What are the two additional excise tax deduction cases under FTA Decision No. 11 of 2025?
Under Article 2 of FTA Decision No. 11 of 2025, the two additional deduction cases are: (1) tax paid on excise goods removed from a Designated Zone for natural shortage inspection purposes where the sample is damaged and becomes irrecoverable; and (2) tax paid in excess on sweetened drinks initially classified under the High-Sugar Category, where a subsequent Laboratory Report proves a lower category applies, for the period 1 January–30 June 2026.
Can a UAE Warehouse Keeper recover excise tax on goods destroyed during natural shortage inspection?
Yes, under Article 2(1) of FTA Decision No. 11 of 2025. If goods are removed from a Designated Zone exclusively for inspection by an Independent Competent Entity to determine the Natural Shortage percentage, and those goods are damaged and become irrecoverable during inspection, the excise tax paid on them can be deducted. Evidence from the Independent Competent Entity confirming the quantity removed, the purpose of removal, and the irrerecoverable damage is required under Article 3(1).
Can an importer recover excise tax paid at the High-Sugar Category rate if a lab report proves a lower rate applies?
Yes, for goods not yet sold. Under Article 2(2) of FTA Decision No. 11 of 2025, the over-paid tax is deductible for tax periods from 1 January to 30 June 2026 where: the Laboratory Report proves the drink falls below the High-Sugar Category threshold (8g/100ml) or is not taxable; the goods were not sold before the deduction right arose; and documentary evidence of both the prior High-Sugar declaration and the unsold stock is provided.
What is the deadline for the sweetened drink over-tax deduction under FTA Decision No. 11?
Under Article 2(2) of FTA Decision No. 11 of 2025, the deduction applies only to tax periods commencing on or after 1 January 2026 and ending on or before 30 June 2026. This is a transitional relief window only — businesses that do not obtain qualifying laboratory reports and claim the deduction within this window cannot recover the over-paid tax under this specific provision after 30 June 2026.
Why does FTA Decision No. 11 of 2025 use the deduction mechanism rather than a refund for these cases?
Using the deduction mechanism (offsetting against Payable Tax in the current return) is faster and more administratively efficient than a formal refund application for relatively small amounts. It also aligns with the general principle in Article 16 of the Decree-Law that deductions are the primary mechanism for recovering previously paid excise tax, with refund applications reserved for situations where deductions cannot absorb the excess.
Related Services
- Excise Tax Return Filing — deduction claims under FTA Decision No. 11 in monthly returns
- Compliance Review — identify eligible deductions for Designated Zone operators and drink importers
- Tax Agency Service — FTA-registered agent for deduction submissions and correspondence
Last reviewed: