The Bureau of Internal Revenue (BIR) is preparing a circular to remove value-added tax (VAT) on allowable system loss charges, a move that could help lower electricity bills for consumers.
BIR Commissioner Charlito Martin Mendoza said the Revenue Memorandum Circular would be issued after the 15-day period following publication of Energy Regulatory Commission (ERC) Resolution No. 26, Series of 2026.
The resolution classifies allowable system loss charges as government-mandated pass-through costs rather than income earned by power generation companies, the National Grid Corp. of the Philippines, and distribution utilities.
System loss refers to electricity lost during transmission and distribution because of technical factors and other causes allowed under regulations. Utilities recover the corresponding cost from customers through their monthly bills.
“Consumers should not be paying VAT on electricity that never actually reaches their homes or businesses,” Mendoza said.
He said the BIR was preparing the issuance in advance so the tax treatment could take effect immediately after the required period expires.
The move follows President Ferdinand Marcos Jr.’s directive to review and clarify tax rules that could provide immediate relief to consumers. It also supports Finance Secretary Frederick Go’s call for reforms whose benefits can be directly felt by the public, Mendoza said.
The planned circular builds on Revenue Memorandum Circular No. 60-2026, issued in June, which clarified that the Lifeline Subsidy, Green Energy Auction Allowance, and other specified government-mandated electricity charges are not subject to output VAT and related creditable withholding taxes.
Mendoza said the BIR would continue reviewing tax rules to identify areas where proper application of the law could provide practical relief to taxpayers.
