BIR moves to remove VAT on electricity system loss charges

Floyd Brenz., Philippine Canadian Inquirer
September 02, 2026

Photo Courtesy: Philippine Information Agency

PHILIPPINES – The Bureau of Internal Revenue is preparing to remove value-added tax on allowable system loss charges in electricity bills, a move expected to provide direct relief to consumers.

The BIR said the measure follows President Ferdinand Marcos Jr.’s directive to review tax rules that could immediately ease the financial burden on the public.

The agency will issue a Revenue Memorandum Circular 15 days after the publication of Energy Regulatory Commission Resolution No. 26, Series of 2026, which classifies system loss charges as government-mandated pass-through costs.

BIR Commissioner Charlito Martin Mendoza said the bureau is preparing the circular so the tax relief can take effect as soon as the required period lapses.

Mendoza explained that the allowable system loss charge represents a cost recovered through electricity bills, rather than income earned by power generation companies, the National Grid Corporation of the Philippines and distribution utilities.

He said consumers should not have to pay VAT on electricity that does not actually reach their homes or businesses.

By removing VAT from the pass-through charge, the BIR expects a lower amount to be passed on to electricity consumers, potentially reducing their overall power bills.

The agency said it will continue reviewing tax rules to identify other areas where proper application of the law could provide practical and immediate relief to taxpayers.