Philippines Eases Household Burden: VAT Removed on System Loss Charges

Households, particularly those consuming 200 kilowatt-hours of electricity, can expect savings of at least P20 on their electricity bills after the Bureau of Internal Revenue (BIR) removed the value-added tax (VAT) on allowable system loss charges imposed by power utilities. “The DOE welcomes BIR’s removal of the value-added tax or VAT on system loss. For the average household, this could translate to at least P20 in savings on your electricity bill,” Energy Secretary Sharon Garin said at a press briefing on Tuesday. Under Revenue Memorandum Circular 097-2026, issued Monday, September 14, the BIR said system loss charges within the cap approved by the Energy Regulatory Commission (ERC) will no longer be subject to 12% VAT, as they will be treated as government-mandated pass-through costs. The Department of Energy (DOE) said the next step is to completely remove system loss charges from electricity bills, following President Ferdinand Marcos Jr.’s directive in his recent State of the Nation Address. The department said the assistance of law enforcement agencies is also needed to implement the directive. “Ang next step po diyan is yung system loss mismo na babawasan at iwawala. This is also a whole-of-government approach. We also need the PNP, DILG, DICT. We also need local government units, all distribution utilities, and all electric cooperatives,” Garin said. (The next step is to reduce and eliminate system loss itself. This is also a whole-of-government approach. We also need the PNP (Philippine National Police), DILG (Department of the Interior and Local Government), and DICT (Department of Information and Communications Technology). We also need local government units, all distribution utilities, and all electric cooperatives.) System loss refers to electricity lost during distribution due to technical and non-technical factors. Consumers are charged for non-technical losses, which include electricity theft, pilferage, and illegal connections such as the use of “jumpers.” The DOE earlier said that the gradual removal of non-technical system loss charges may take a year. —VBL, GMA News