Sweetened Beverages Excise Tax Regulations

Legal basis and legislative linkages

The regulations implement Section 150-B of the NIRC, as amended, on the excise tax on sweetened beverages, introduced by Section 47 of Republic Act No. 10963.
Section 15 ties penalties to the NIRC enforcement framework under Title X of the NIRC and further provides specific penalty provisions.
Section 14(f) sets surety bond requirements pursuant to Section 160 of the NIRC.
Section 5 frames payment and filing duties under the NIRC excise administration rules, including references to Section 130 (A)(2)(3) of the NIRC.

Policy, coverage, and regulated subject

The regulations govern the levy, assessment, and collection of the specific excise tax on sweetened beverages.
The regulations define and regulate excise treatment for locally manufactured and imported sweetened beverages and their movements for production, sale, or export.
The regulations establish compliance requirements for manufacturers, importers, toll manufacturers, and sub-contractors engaged in manufacturing, bottling, packaging, or related processes.
Food category system references in the regulations use Codex Alimentarius Food Category Descriptors (Codex Stan 192-1995, Rev 2017 or the latest) as adopted by the FDA for classification and exclusions.

Definitions: sweeteners and sweetened beverages

“Sweetened Beverages (SBs)” are non-alcoholic beverages of any constitution (liquid, powder, or concentrates) that are pre-packaged and sealed under FDA standards and contain caloric and/or non-caloric sweeteners added by manufacturers.
“Sweetened Beverages (SBs)” include, among others, the following FDA-referenced categories under Codex:
- Sweetened juice drinks;
- Sweetened tea;
- All carbonated beverages;
- Flavored water;
- Energy and sports drinks;
- Other powdered drinks not classified as milk, juice, tea, and coffee;
- Cereal and grain beverages; and
- Other non-alcoholic beverages that contain added sugar.
“Caloric Sweetener” means a sweet substance including sucrose, fructose, and glucose that produces a certain sweetness.
“High Fructose Corn Syrup (HFCS)” means a sweet saccharide mixture containing fructose and glucose derived from corn and added to provide sweetness to beverages, including other similar fructose syrup preparations.
“Non-Caloric Sweetener” means an artificially or chemically processed sweet substance that produces sweetness and can be directly added to beverages, including aspartame, sucralose, saccharin, acesulfame potassium, neotame, cyclamates, and other non-nutritive sweeteners approved by Codex Alimentarius and adopted by the FDA.

Tax rates, tax base, and computation

Section 3 imposes, effective January 1, 2018, a specific tax on sweetened beverages under Section 150-B of the NIRC, as amended.
The excise tax is computed per liter of volume capacity and is levied based on the type of sweeteners used:
- PHP 6.00 per liter when using purely caloric sweeteners, purely non-caloric sweeteners, or a mix of caloric and non-caloric sweeteners.
- PHP 12.00 per liter when using purely high fructose corn syrup (HFCS) or in combination with any caloric or non-caloric sweetener.
- Exempt when using purely coconut sap sugar and purely steviol glycosides, subject to specific compliance requirements.
Coconut sap sugar must comply with the Philippine National Standard (PNS)/Bureau of Agricultural and Fisheries Products Standards (BAFPS) 76:2010 ICS 67.180 or the latest updated standards.
Steviol glycosides specified must comply with the Joint FAO/WHO Expert Committee on Food Additives (JECFA) specifications.
The regulations include illustrative computations demonstrating the use of specific tax rate per liter and the conversion from cases/packs/bottles to total volume in liters.

Who pays, liability rules, and exemptions

Manufacturers of sweetened beverages must pay the excise tax imposed under Section 150-B, Chapter VI, Title VI of the Tax Code, as amended.
The person having possession of domestically manufactured sweetened beverages removed from the place of production without payment of excise tax must pay the excise tax.
Owners or importers of sweetened beverages must pay the excise tax imposed under Section 150-B, Chapter VI, Title VI of the Tax Code, as amended.
The person having possession of imported sweetened beverages removed from customs custody without payment of excise tax must pay the excise tax.
The excise tax is payable by the owner or importer or by any person found in possession of untaxed sweetened beverages, including any person other than one legally entitled to exemption in the proper case.
If sweetened beverages are brought or imported tax-free by exempt persons/entities/agencies and are subsequently sold, transferred, or exchanged in the Philippines to non-exempt persons/entities, the purchaser or transferee, owner/possessor is considered the importer and is liable for the excise tax due.
Toll manufacturers, bottlers, and other sub-contractors of manufacturers or importers are not subject to excise tax, but the manufacturer or importer is liable to pay the excise tax in such cases.

Filing, payment, and import release mechanics

For locally manufactured sweetened beverages, a separate return (BIR Form No. 2200-S) is filed for each place of production with the concerned Revenue District Office (RDO) where the Head Office is registered.
For locally manufactured sweetened beverages, excise tax is paid before removal from the place of production.
The return and excise tax payment may be made at an authorized agent bank (AAB), revenue collection officer, or duly authorized city or municipal treasurer in the Philippines under Section 130 (A)(2)(3) of the NIRC, as amended.
For imported sweetened beverages, importers/traders must apply for an Authority to Release Imported Goods (ATRIG) with Excise LT Regulatory Division (ELTRD), BIR National Office, and pay the corresponding excise tax based on the equivalent yield in liters of volume capacity.
Excise tax on imported finished goods is paid before release from customs custody.
Excise tax on imported raw materials intended for production is paid before removal of the finished goods from the place of production.

Exclusions from the sweetened beverages excise tax

Milk products are excluded from the excise tax under Section 150-B, including plain milk, infant formula milk, follow-on milk, growing up milk, powdered milk, ready-to-drink milk, flavored milk, and fermented milk.
Milk product is defined as products obtained by processing milk that may contain food additives and other ingredients functionally necessary for processing under Codex General Standard for the Use of Dairy Terms (Codex Stan 206-1999).
Soymilk and flavored soymilk are excluded when the main ingredients are soybean and/or soy derivative(s) (such as soybean flour, soybean concentrates, soybean isolates, or defatted soya) and water, produced without fermentation under Codex Stan CXS 322R-2015.
One Hundred Percent (100%) Natural Fruit Juices are excluded when they have no added sugar or caloric sweetener; any product with added sugar or sweetener is excisable depending on the kind of sweetener and its corresponding rate under the Act.
One Hundred Percent (100%) Natural Vegetable Juices are excluded when they have no added sugar or caloric sweetener; any product with added sugar or sweetener is excisable depending on the kind of sweetener and its corresponding rate under the Act.
Meal Replacement and Medically Indicated Beverages are excluded, including liquids or powders for oral nutritional therapy for persons who cannot absorb or metabolize dietary nutrients from food or beverages, and oral electrolyte solutions for infants and children formulated to prevent dehydration due to illness.
Ground coffee, instant soluble coffee, and pre-packaged powdered coffee products are excluded.
Beverage classification is determined by the FDA.

Movements: raw materials, semi-processed goods, consumption

Manufacturers subject to tax cannot transfer or remove raw materials from the place of production except when the transfer/removal is intended for further processing to other registered production or toll-manufacturing plants, and it is accompanied by an Excise Taxpayer’s Removal Declaration (ETRD).
Raw materials are the chief substance or ingredient of any constitution (liquid, syrups, powder, concentrates) for production of sweetened beverages.
Raw materials intended for further processing are not subject to excise tax.
Raw materials that clearly need only repacking are subject to excise tax even if declared as raw materials.
Packaging materials and supplies are not raw materials for purposes of the regulations.
Semi-processed goods (including syrups/puree/concentrates sold to fast food chains where mixed with carbonated water and dispensed) are treated as finished goods subject to excise tax for excise-tax purposes.
The excise tax for such semi-processed goods is computed using a pre-determined formula to arrive at the equivalent yield in liters, based on the manufacturer’s submitted data approved by the FDA.
Sweetened beverages produced and consumed within the premises of the manufacturer are subject to excise tax payable by the manufacturer.
The volume in liters and excise tax due are declared in excise tax returns and paid in the same manner as removals for ordinary removals of excisable sweetened beverages.
The ETRD (or other prescribed form) for on-premises consumption is issued by the authorized manufacturer representative, attested by the Revenue Officer assigned at the premises.
The brand name and volume of sweetened beverages consumed within production premises must be separately indicated in the manufacturer’s Official Register Books (ORBs).

Export of tax-free sweetened beverages

Sweetened beverage products intended for export may be removed from the place of production without prepayment of excise tax if all required conditions are met.
A permit per shipment must be secured from the BIR Office where the manufacturer is registered or required to be registered as an excise taxpayer before removal.
A surety bond must be posted to guarantee payment of excise tax otherwise due on removal:
- For a performance surety bond, the bond amount equals the excise tax otherwise due on the actual volume or value exported.
- For a continuing surety bond, the bond amount equals the excise tax otherwise due on the estimated annual volume or value exported, or on the excise tax due on unliquidated export shipments, whichever is lower.
A revised surety bond must be submitted when the existing bond is no longer sufficient to cover subsequent tax-exempt exportations; otherwise, no permit is issued.
The exported goods must be directly transported, loaded aboard the international shipping vessel or carrier, shipped directly to the foreign country of destination, and must not return to the Philippines.
Proof of exportation must be submitted within thirty (30) days from the actual date of exportation, subject to a one-time extension of up to 30 days upon written request for meritorious reasons.
The export marking requirement requires the phrase “EXPORTED FROM THE PHILIPPINES” to be printed on each label attached/affixed on the primary container in recognizable and readable manner.
If conditions are not met, the removal is subject to excise tax inclusive of penalties and no subsequent application for permit for tax-free exportation is processed unless all requirements are fully complied with.

Permits to operate and assessment numbering

An application for a permit to engage in business as manufacturer or importer must be filed with the ELTRD, BIR National Office where the applicant is required to be registered as an excise taxpayer.
The application must be accompanied by the following:
- Request Letter addressed to Chief, Excise LT Regulatory Division (ELTRD);
- Importer/Manufacturer’s Surety Bond with initial coverage (P100,000.00);
- SEC Certificate of Registration and Articles of Incorporation/Partnership and By-Laws (for corporation/partnership) and DTI Certificate of Registration (for individual);
- Mayor’s Permit as required by the Local Government Code;
- BIR Certificate of Registration with latest registration fee BIR-FORM 0605;
- Latest Income Tax Return duly filed and received by the BIR if applicable;
- Location Map and Plat & Plan of the Warehouse, and manufacturer Blueprint; and
- Latest approved FDA certificate of product registration for every product/brand name manufactured/imported.
Permits are assigned assessment numbers in the following order: SB1 for manufacturer, SB1 for importer, and SBT for toll-manufacturer.
The assessment code incorporates a code representing the place of production/plant/warehouse location, assigned by the BIR or as defined by the manufacturer/importer/toll-manufacturer.
Where the manufacturer/importer/toll-manufacturer already has an existing code for its place of production as part of its batch/lot coding, it may adopt the same, but the manufacturer/importer/toll-manufacturer must provide the BIR corresponding legends/guides for the batch code prior to use.

Tolling, bottling, and subcontracting rules

Sub-contractors engaged to manufacture sweetened beverages or undertake any part of manufacturing (including bottling, packaging, etc.) must secure a Permit to Operate as a sub-contractor at the ELTRD.
A newly registered sub-contractor/toller is issued an Assessment Number; a sub-contractor/toller already registered as an excise taxpayer is no longer required to get a separate assessment number for the subcontracted/toller activity.
Newly registered sub-contractors/tollers must install and maintain ORBs and submit them using a format prescribed by the BIR.
For submission of ORB transcript sheets by sub-contractors, the deadline is on or before the eighth (8th) day of the month immediately following the month of operation and every eighth (8th) day thereafter, submitted to the LT Performance Monitoring and Programs Division (LTPMPD).
For each brand, the manufacturer/importer/owner and sub-contractor must file separate permit applications with the BIR Office prior to the initial production of the brand.
The permit application for the manufacturer/importer/owner must be supported by the Sub-contracting Agreement and the Permit to engage in business as manufacturer or importer; if the manufacturer is not yet a duly registered excise taxpayer, it must first undergo registration.
The permit application for the sub-contractor must be supported by the Sub-contracting Agreement, Permit to engage in business as sub-contractor, and a plant layout and production process flow charts showing the production line and production/storage details for the brand.
During the sub-contracting activity:
- Raw materials supplied by the manufacturer/importer/owner must be transported and unloaded in the sub-contractor’s premises from the brand owner’s production premises/warehouse or from customs custody if imported.
- Only the dedicated storage areas, storage tanks, and production lines approved in the plant layout and granted in the permit may be used.
- Any change in approved storage/tank/line requires a prior permit, except for temporary/emergency changes due to fortuitous events or force majeure, in which case written notification must be filed immediately.
- If the BIR Office cannot provide a revenue officer to monitor operations, an advance production schedule with prescribed documents must be submitted to ELTFOD before each scheduled production run, including the quantity of basic raw materials, scheduled production date, and quantity of finished products to be produced.
- All removals from the sub-contractor’s premises/warehouse must be covered by an ETRD (or prescribed form), with a separate set of ETRDs exclusively for activity covered by the subcontracting agreement.
- Any other terms and conditions necessary for compliance must be observed.

Administrative compliance: brands, labels, records, bonds, supervision

Prior to initial manufacture for public distribution or importation of existing and new brands and their variants, an application for registration must be filed with ELTRD.
Brand registration must be supported by a Manufacturer’s/Importer’s Sworn Statement filed with the Commissioner, showing:
- SB products manufactured or produced and corresponding monthly volume of production;
- Percentage (%) of Sweeteners Used per Product/Variant (% by volume);
- Brand names;
- Bottle content in liter per product;
- Number of bottles per case per product;
- Kind/Type of Sweeteners used;
- Applicable specific tax rate; and
- Equivalent servings (in liter) for concentrated or powdered form.
The sworn statement must be updated and submitted on or before the end of June and December of the year.
Brand registration must also be supported by an exact replica of the proposed label and secondary container artwork in three (3) copies.
The following label/container markings must be conspicuously printed in easily recognizable and readable manner:
- For locally manufactured products: the name and address of the manufacturer; for imported products: the name and address of the foreign manufacturer and the name and address of the importer if applicable;
- The assessment number may be printed on the container (e.g., bottom of bottle, crown, neck) other than the label, but reflecting it on the container is mandatory;
- The phrase “EXPORTED FROM THE PHILIPPINES” for export brands, with exportation not allowed unless required export markings are prominently printed on containers;
- The phrase “FOR EXPORT TO THE PHILIPPINES; TAX AND DUTY PAID” for imported products for the domestic market;
- FDA rules require indicating the type of sweetener used, and for powdered sweetened beverages, indicating the equivalent of each serving per liter of volume capacity.
Applications for eATRIG for excise tax purposes must be done online, processed in ELTRD, BIR National Office, and approved by the Chief of ELTRD.
No ATRIG is issued if the imported sweetened beverages are already released from customs custody.
No subsequent ATRIG application is processed unless the importer has submitted proof of payment of excise tax due on imported products covered by previously issued ATRIG.
The excise returns and removal documents for all removals are prescribed:
- BIR Form No. 2200-S for Excise Tax Returns and BIR Form No. 2299 for the Excise Taxpayer’s Removal Declaration (ETRD).
- ETRDs are requisitioned from ELTFOD in the BIR National Office or from Excise Tax Area Offices under the BIR revenue regions with jurisdiction over the manufacturer.
- Preparation, issuance, cancellation, and reportorial requirements follow existing BIR rules.
Every manufacturer or importer must keep ORBs and other forms/records required by the Commissioner, kept within the production/importer’s warehouse and made available for inspection by authorized internal revenue officers.
ORB transcript sheets must be submitted on or before the eighth (8th) day of the month immediately following the month of operation for manufacturers, importers, and sub-contractors to the concerned BIR office or Excise Tax Area (EXTA) having jurisdiction.
Surety bond requirements for manufacturers and importers are imposed under Section 160 of the NIRC:
- Initial bond: P100,000; if after six (6) months of operation the initial bond is less than the total excise tax paid, the bond must be adjusted to twice the tax actually paid for the period.
- Succeeding years: bond based on the actual total excise tax paid on locally manufactured and/or imported sweetened beverage during the immediately preceding year.
- Bonds are conditioned on faithful compliance with applicable laws and rules and on satisfaction of fines and penalties imposed by the NIRC.
Once excise tax is paid, tax-paid sweetened beverages must not thereafter be stored or permitted to remain in the manufacturing plant or production place.
The BIR must deploy revenue officers day-to-day to check or supervise production and removal, with at least:
- Three (3) revenue officers where the establishment operates twenty-four (24) hours a day;
- Two (2) revenue officers if it operates more than eight (8) hours; and
- At least one (1) in a small factory who renders eight (8) hours of duty—with the further rule that small manufacturers located in contiguous places follow the same “small factory” staffing concept.

Penalties and enforcement consequences

Violations of the regulations are subject to the corresponding penalties under Title X of the NIRC.
The regulations further provide specific penalty provisions:
- A manufacturer who knowingly misdeclares or misrepresents data in the required sworn statement is penalized upon discovery by summary cancellation or withdrawal of the permit to engage in business as manufacturer under Section 268 of the NIRC.
- A corporation, association, or partnership liable for acts/omissions violating Section 150-B (as implemented) is fined treble the aggregate amount of deficiency taxes, surcharges and interest assessed under Section 150-B.
- A person liable for prohibited acts/omissions is criminally liable and penalized under Section 254 of the NIRC.
- A person who willfully aids or abets is criminally liable in the same manner as the principal.
- An offender who is not a Philippine citizen is deported immediately after serving the sentence, without further proceedings for deportation.

FDA role in labeling and surveillance

Starting June 1, 2018, the FDA must require all manufacturers and importers of sweetened beverages covered by the Act to indicate on labels:
- the type of sweetener used; and
- for sweetened beverages in powder form, the number of liters per pack size (net weight volume).
The FDA must conduct post-marketing surveillance of sweetened beverages displayed in supermarkets, groceries, retail stores and/or inspect manufacturing sites to determine compliance with Section 150-B.
Violations of the Act, including mislabeling or misbranding, are punishable under existing laws to the extent applicable.
The FDA must provide a summary list of registered sweetened beverages with required details and information using the prescribed format for Annex “A”.

Transitional compliance deadlines

Transitory requirements apply upon the effectivity of the Act:
- Taxpayers engaged in manufacturing and importation must update their Certificate of Registration (BIR Form No. 2303) using BIR Form No. 1905 by August 31, 2018 to add the excise tax type “Xb” with LT Assistance Division or Excise LT Regulatory Division for Large Taxpayers, or with the RDO for Non-Large Taxpayers.
- Manufacturers and importers must secure a Permit to operate as Manufacturer/Toll-Manufacturer/Importer of Sweetened Beverages at ELTRD on or before August 31, 2018.
- Importers must secure ATRIGs at ELTRD before release of shipments from customs custody; until sweetened beverages are included in the NSW system of the BOC, importers must submit hard copy of the duly notarized application form to ELTRD, BIR National Office, and no ATRIG may be electronically transmitted to BOC until classification is included in the NSW.
- Manufacturers and importers must requisition from ELTFOD in writing the required forms to support removals, including ETRD.
- Manufacturers and importers must submit to ELTRD, copy furnished to ELTFOD, by August 31, 2018:
  - Notarized summary list of existing and new brands for registration purposes;
  - Manufacturer’s Sworn Statement on existing and new locally manufactured brands; and
  - Notarized sworn declarations and inventory list as of December 31, 2017.
- Manufacturers must use downloadable BIR Form No. 2200-S for filing and paying excise tax due.
- Weekly attachments must accompany BIR Form 2200-S submissions, including ETRD-BIR Form No. 2299, summary list of removals, and liquidation statement of advance deposits and application, sent to sb.attachment@bir.gov.ph.
- Labeling compliance requiring printing the name and address of manufacturer/importer must be complied with by August 31, 2018.

Severability and effectivity clause

Separability is guaranteed: if any provision is declared invalid by a court of competent jurisdiction, the remainder of the regulations remains in force and effect.
The regulations take effect beginning January 1, 2018.