BIR Removes VAT on System Loss Charge

MANILA, Philippines — 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). In Memorandum Circular No. 97-2026 issued Monday, the BIR circularized ERC Resolution No. 26 and formally recognized the allowable system loss charge within the cap. The system loss charge is a fee that power distributors can impose on consumers to recover electricity losses incurred during transmission and distribution. Previously, this charge was subject to VAT, contributing to higher electricity bills. This VAT removal is expected to alleviate the financial burden on electricity consumers. It is particularly significant amid economic recovery efforts and persistent inflation, serving as a measure to support household budgets. In the Philippines, electricity costs have a substantial impact on both daily life and economic activities. For Overseas Filipino Workers (OFWs), electricity bills are a key component of household expenses when sending remittances home. Furthermore, industries with high electricity consumption, such as the Business Process Outsourcing (BPO) sector, could benefit from cost reductions. This decision aligns with the ERC's efforts to enhance transparency in electricity pricing and strengthen consumer protection. The collaboration between BIR and ERC signals a move towards building a fairer and more sustainable electricity market. Source: Inquirer Business