PADILLA, Eenah Joelle A.

Taxation Law Review

2018-11-003515 October 1, 2019

REVENUE REGULATION NO. 20-2018: EXCISE TAX ON SWEETENED BEVERAGES

Sugar-sweetened beverages are more strongly associated with high energy intake and
weight gain than any other form of processed food.i Although obesity prevalence in the
Philippines have remained low relative to other countries in the Association of South-East Asian
Nations (ASEAN), a growing proportion of Filipinos of all ages are overweight or obese,
nevertheless, which is likely to substantially increase the number of productive years lost due to
poor health.ii Thus, the Department of Finance (DOF), along with Department of Health (DOH),
support the newly imposed excise tax on sweetened beverages under Republic Act (RA) 10963
or Tax Reform for Acceleration and Inclusion (TRAIN) Law as part of a comprehensive health
measure to curb the consumption of sweetened beverages, and address the worsening number
of diabetes and obesity cases in the country, while arising revenue for complementary health
programs that address these problems.

Sweetened beverages, as defined under the TRAIN Law, are non-alcoholic beverages of
any constitution, such as liquid, powder, or concentrated, that are pre-packaged and sealed in
accordance with the Food and Drug Association (FDA) standards that contain caloric and / or non-
caloric sweeteners added by the manufacturers. Unfortunately, the following drinks that we've
come to love are now taxed under the TRAIN Law: sweetened juice drinks and tea; all carbonated
beverages such as soft drinks, etc.; flavored water; energy and sports drinks; cereal and grain
beverages; other powdered drinks not classified as milk, juice tea and coffee; and other non-
alcoholic beverages that contain added sugar. Simply, these are beverages that contain high level
of certain sugars that are viewed to provide unnecessary or empty calories with little or no
nutrition.

Such sweetened beverages are to be levied at 6php or 12php per liter of volume capacity
depending on the type of added sweetener. Sweetened beverages using purely caloric
sweeteners, and purely non-caloric sweeteners, or a mix of caloric and non-caloric sweeteners,
are subject to 6php excise tax per liter of volume of capacity. On the other hand, 12php per liter
of volume capacity is imposed on sweetened beverages using purely high fructose corn syrup
(HFCS) or in combination with any caloric or non-caloric sweetener.

On a positive note, products that use purely coconut sap sugar and purely steviol
glycosides (stevia leaves extract) are exempt from the excise tax. The law also excludes from the
scope of excise tax the following: all milk products or the products obtained by any processing of
milk which may contain food additives and other ingredients functionally necessary for the
processing, such as but not limited to milk powders and cream powder, fermented milks,
evaporated milks, sweetened condensed milks, etc.; soymilks and flavored soymilk or products
with a main ingredient of soybean and/or soy derivatives; 100 percent natural fruit and vegetable
juices that do not have added sugar or caloric sweetener, meal replacement and medically
indicated beverages or any liquid or powder drink/product for oral nutritional therapy for
persons who cannot absorb or metabolize dietary nutrients from food or beverages; and ground,
instant soluble and pre-packaged powdered coffees such the famous “3-in-1” coffee.

These excise taxes are actually imposed on manufacturers, importers, or persons in

possession of the sweetened beverages before its withdrawal from the place of manufacture. An
application for a Permit shall be filed with the Excise LT Regulatory Division (ELTRD), BIR National
Office where the manufacturer or importer is required to be registered as an excise taxpayer.
However, manufacturer of sweetened beverages subject to tax herein are not allowed to transfer
or remove raw materials, which refer to chief substance or ingredient of liquid, syrups, powder,
concentrates, or any constitution for the production of sweetened beverages, from place of
production, except when the transfer or removal thereof is intended for further processing to its
other registered production or toll-manufacturing plants, and shall be accompanied by an Excise
Taxpayer’s Removal Declaration (ETRD). Meanwhile, semi-processed goods, such as syrups,
puree and concentrates, sold to fast food chains where such are mixed with carbonated water
and dispensed through soda vending or juice dispensing machines, are to be considered as
finished goods subject to excise tax notwithstanding that the same are in their semi-processed
state.

Moreover, for the exportation of sweetened beverages, such products may be removed
from the place of production without the prepayment of excise tax, unless the following are
complied with: a permit; a bond; such products must be directly transported, loaded aboard the
international shipping vessel or carrier, and shipped directly to the foreign country of destination
without returning to the Philippines; proof of exportation such as, but not limited to, export entry
declaration duly filed with the Bureau of Customs, commercial invoice, packing list, bill of lading,
etc.; lastly, a prescribed phrase “EXPORTED FROM THE PHILIPPINES” must be printed on each
label that is attached/affixed on the primary container in a recognizable and readable manner.
In case of failure to comply, the removal of the product shall be subject to excise tax, inclusive of
penalties, and no subsequent application for permit for tax-free exportation will be processed
and granted unless the aforementioned requirements have been fully complied with.

i Woodward-Lopez G, Kao J, Ritchie L. To what extent have sweetened beverages contributed to the obesity epidemic? Public Health Nutr.
(2011), 499-509. http://dx.doi.org/10.1017/S1368980010002375
ii 2nd National Nutrition Summit: 8th National Nutrition Survey. Manila: Food and Nutrition Research Institute, Department of Science and

Technology; 2013. Available from: http://122.53.86.125/NNS/8thNNS.pdf