The Bureau of Internal Revenue (BIR) officially removed the value-added tax (VAT) on allowable system loss charges on electricity bills, lowering consumers’ power costs.
The BIR officially recognized the system loss charge as a government-mandated charge excluded from gross sales for VAT purposes in accordance with the issued Memorandum Circular No. 96-2026 within the Energy Regulatory Commission (ERC)-approved cap.
BIR Commissioner Charlito Mendoza stated that removing the VAT from the system is consistent with President Ferdinand Marcos Jr.’s directive to pursue measures that will benefit consumers by cutting costs on bills.
“Every peso saved by consumers counts. This may be one part of a broader effort to bring down electricity costs, but it is [a] relief that can be implemented under existing law,” Mendoza said.
To ensure compliance, generation companies, the National Grid Corporation of the Philippines (NGCP), distribution utilities, and electric cooperatives are mandated to ensure that allowable system losses are separately itemized in billing statements,
According to Mendoza, the exclusion would be effective once the BIR released the relevant tax guidelines and its resolution was published.
“For consumers, the practical effect is straightforward: once the new rules become effective, VAT will no longer be imposed on the allowable system loss portion of the electricity bill. That means a lower amount will be passed on to consumers on covered billings and transactions,” Mendoza added.
