The Bureau of Internal Revenue (BIR) has removed value-added tax (VAT) from allowable electricity system loss charges, giving consumers another potential reduction in their power bills as the government moves to ease electricity costs through administrative measures.
Under Revenue Memorandum Circular No. 97-2026 issued Sept. 14, the BIR said system loss charges within the cap approved by the Energy Regulatory Commission (ERC) are pass-through costs and should not form part of the gross sales of generation companies, the National Grid Corporation of the Philippines and distribution utilities for VAT purposes.
The change means the covered system loss component of electricity bills will no longer be subject to output VAT, provided it is separately identified on the bill or invoice.
“Every peso saved by consumers counts,” BIR Commissioner Charlito Martin Mendoza said. “While Congress continues to consider wider reforms on electricity charges and taxes, the BIR is acting on the measures within its authority that can reduce the burden on consumers.”
The circular implements ERC Resolution No. 26, Series of 2026, approved Aug. 26, and applies prospectively.
The VAT exclusion also covers creditable withholding on VAT. However, it does not extend to income tax and the corresponding creditable withholding tax.
The latest measure expands the BIR’s efforts to remove taxes from government-mandated electricity charges that are passed on to consumers. RMC No. 60-2026 earlier clarified the tax treatment of the Lifeline Subsidy, Green Energy Auction Allowance and other specified charges.
The BIR’s action comes as high electricity costs remain a concern for households and businesses, with taxes and other pass-through charges forming part of monthly power bills.
“No single measure will solve the entire cost of electricity,” Mendoza said, adding that the bureau would continue to act where existing tax rules allow it to reduce costs borne by consumers.
