Philippines removes VAT on electricity system loss charges

The Philippine Bureau of Internal Revenue (BIR) has removed the value-added tax (VAT) on allowable system loss charges in electricity bills. Under Revenue Memorandum Circular No. 97-2026, the BIR now recognizes these charges, which fall within the cap approved by the Energy Regulatory Commission (ERC), as government-mandated pass-through costs rather than part of gross sales.

While consumers and advocacy groups like Kuryente.org have welcomed the decision, they argue that further action is needed to reduce the overall financial burden. Kuryente.org National Coordinator Bas Umali has urged the administration to prioritize the removal of VAT throughout the entire power sector value chain.

Additionally, there are ongoing discussions regarding non-technical system losses—such as power theft and improper metering. While the Department of Energy has proposed a ₱7.5 billion plan to address these losses, concerns remain regarding how such a plan would be funded and whether it might result in new charges being passed on to consumers.