Philippines: VAT Exemption on System Loss Charges to Reflect in November Electricity Bills

The Energy Regulatory Commission (ERC) in the Philippines announced that the value-added tax (VAT) on allowable system loss charges imposed by power utilities is likely to reflect in consumers' November electricity bills. This move follows a circular issued by the Bureau of Internal Revenue (BIR), with the ERC engaging stakeholders to fast-track its implementation. ERC chairperson Francis Saturnino Juan stated that the VAT exemption is expected to take effect by October consumption, with consumers seeing the impact on their November bills. Under Revenue Memorandum Circular 097-2026, system loss charges within the cap approved by the ERC will no longer be subject to the 12% VAT, as they are treated as government-mandated pass-through costs. However, the ERC clarified that only the VAT on system loss charges is being scrapped for the meantime. The system loss charge itself covers associated generation and transmission costs of lost electricity and remains separate from the actual generation, transmission, and distribution charges that consumers pay. Juan explained that VAT on these core charges cannot be removed as it is mandated by law. The Department of Energy had previously indicated that households consuming around 200 kilowatt-hours (kWh) of electricity could expect savings of at least P20 once the VAT on system loss charges is scrapped. This measure is anticipated to provide some relief to household budgets. Source: GMA Money Philippines