ELECTRICITY consumers are set to receive lower power bills following an announcement by Bureau of Internal Revenue (BIR) Commissioner Charlito Martin R. Mendoza that the agency is preparing to remove the Value-Added Tax (VAT) on allowable system loss charges.
The move aligns with President Ferdinand R. Marcos Jr.’s directive to review and clarify tax policies to provide immediate financial relief to the public.
The BIR will formally issue a Revenue Memorandum Circular 15 days after the publication of Energy Regulatory Commission (ERC) Resolution No. 26, Series of 2026.
Under the new resolution, the allowable system loss charge is reclassified as a government-mandated pass-through cost rather than taxable income for generation companies, the National Grid Corporation of the Philippines (NGCP), and distribution utilities.
“In simple terms, consumers should not be paying VAT on electricity that never actually reaches their homes or businesses,” Mendoza explained.
He noted that because a pass-through charge is simply collected and passed along, removing the VAT directly reduces the final amount billed to consumers.
Mendoza stressed that the reform reflects the guidance of Finance Secretary Frederick Go to focus on immediate, tangible benefits for taxpayers.
This upcoming policy follows RMC No. 60-2026, issued in June, which exempted other government-mandated fees—such as the Lifeline Subsidy and the Green Energy Auction Allowance—from output VAT and related withholding taxes.
Mendoza stated that the BIR will continue evaluating existing tax rules to identify further opportunities to ease the burden on everyday taxpayers wherever legally allowable.
