Philippine Bureau of Internal Revenue VAT updates

The Philippine Bureau of Internal Revenue (BIR) has issued new circulars regarding Value-Added Tax (VAT) applications in different sectors.

In September 2026, the BIR announced that qualified export-oriented enterprises (EOEs) may claim VAT refunds on local purchases and importations while awaiting zero-rating certification from the Department of Trade and Industry-Export Marketing Bureau. This measure, under Revenue Memorandum Circular No. 96-2026, aims to ensure fair tax treatment during a transition period ending December 31, 2025.

Shortly after, the BIR issued Revenue Memorandum Circular No. 97-2026, which exempts allowable system loss charges from VAT. These charges, which must remain within caps approved by the Energy Regulatory Commission (ERC), are now classified as government-mandated pass-through costs. This change is intended to reduce electricity costs for consumers by excluding the system loss portion of bills from output VAT or creditable withholding tax. The measure applies prospectively based on the effectivity of ERC Resolution No. 26, Series of 2026, and requires affected entities—including generation companies, distribution utilities, and the National Grid Corporation of the Philippines (NGCP)—to identify these charges separately in billing statements.

While Senator Loren Legarda noted the move follows her legislative inquiries, BIR Commissioner Charlito Martin R. Mendoza clarified that the exclusion does not extend to income tax. Although consumer advocacy groups like Kuryente.org have welcomed the decision, they have urged the administration to remove VAT across the entire power sector value chain. Meanwhile, discussions continue regarding non-technical system losses, such as power theft, and a proposed ₱7.5 billion Department of Energy plan to address them.