Bureau of Internal Revenue (BIR) Commissioner Charlito Martin R. Mendoza announced that the agency is preparing an issuance to remove the Value-Added Tax (VAT) on the allowable system loss charge in electricity bills, acting on President Ferdinand R. Marcos Jr. directive to provide immediate economic relief to consumers.
The BIR will formally issue the Revenue Memorandum Circular 15 days after the publication of Energy Regulatory Commission (ERC) Resolution No. 26, Series of 2026, which formally classifies system loss charges as a government-mandated pass-through cost.
Consumers should not be paying VAT on electricity that never actually reaches their homes or businesses, Mendoza stated. A pass-through charge is a cost collected from consumers and passed on to the proper recipient. Removing VAT from that charge means a lower amount will be passed on to electricity consumers.
Under ERC Resolution No. 26, Series of 2026, allowable system loss is treated as a recovered cost rather than taxable income for generation companies, the National Grid Corporation of the Philippines (NGCP), and distribution utilities.
Mendoza emphasized that the move aligns with guidance from Finance Secretary Frederick Go to implement reforms with immediate benefits for the public. The forthcoming directive builds on RMC No. 60-2026, issued in June, which exempted other mandated charges, such as the Lifeline Subsidy and the Green Energy Auction Allowance, from output VAT and creditable withholding taxes.
