BIR scraps VAT on system loss charge to ease power costs

September 14, 2026

By ABOGADO.COM.PH Staff

The Bureau of Internal Revenue (BIR) has removed the Value-Added Tax (VAT) on the allowable system loss charge within the cap approved by the Energy Regulatory Commission (ERC).

Under Revenue Memorandum Circular No. 97-2026 issued Sept. 14, the BIR recognized the allowable system loss charge as a government-mandated pass-through cost excluded from gross sales for VAT purposes.

BIR Commissioner Charlito Martin R. Mendoza said the move could provide practical relief to electricity consumers.

Mendoza said the measure could help reduce electricity costs while broader reforms are being considered by Congress.

The new VAT treatment will apply prospectively upon the effectivity of ERC Resolution No. 26, Series of 2026.#

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