BIR Prepares VAT Removal on System Loss Charge in Power Bills

The Bureau of Internal Revenue (BIR) is preparing a revenue memorandum circular (RMC) to remove the value-added tax (VAT) on the allowable system loss charge in electricity bills. This action is in response to President Ferdinand R. Marcos Jr.'s directive to review and clarify tax rules that can provide immediate relief to consumers. BIR Commissioner Charlito Martin R. Mendoza stated that this move is expected to alleviate the burden of electricity bills for the public, particularly for low-income households. The system loss charge is a component of electricity bills that power utilities impose on consumers to cover power losses in the transmission grid, and it has been subject to VAT. The removal of VAT is anticipated to have a direct impact on reducing electricity costs, which have been straining household budgets amidst rising inflation. In the Philippines, electricity expenses constitute a significant portion of household spending, and easing this burden directly affects the daily lives of citizens. The Marcos administration has prioritized stabilizing the lives of its citizens and is actively implementing support measures through taxation. The removal of VAT on system loss charges is viewed as part of these efforts. The specific effective date and procedures are expected to be detailed once the RMC is issued. Electricity rates in the Philippines are determined by several factors, including fuel price fluctuations, transmission grid maintenance costs, and taxes. The VAT removal on system loss charges directly addresses one of these contributing factors, and its impact will be closely monitored. Source: Inquirer NewsInfo