BIR removes VAT on system loss charges in power bills
No more VAT on allowable system loss charges.
The Bureau of Internal Revenue (BIR) has exempted the 12% value-added tax (VAT) on allowable system loss charges from power bills, according to a recent ruling. Electricity consumers will no longer have to pay the VAT on this specific charge, which is considered a pass-through cost mandated by the government. The BIR confirmed this decision through Revenue Memorandum Circular No. 97-2026 issued on September 14.
The exclusion applies prospectively, meaning it will take effect once the BIR issues the corresponding tax guidance following the publication of the ERC resolution. While consumers will continue to pay the allowable system loss charge itself, the additional VAT imposed on that portion of the bill will no longer be collected. The BIR has directed power companies, the National Grid Corp. of the Philippines, and distribution utilities to separately identify allowable system loss charges in billing and related documents.
This change aims to provide relief to consumers, bringing down electricity costs, although it does not remove the system loss charge itself. The BIR Commissioner Charlito Martin Mendoza stated that this relief does not negate the responsibility of consumers to pay for the portion of electricity losses that utilities are allowed to recover under the Energy Regulatory Commission rules.
Written by urgent.news from Philippine Star Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
