Philippines: VAT on System Loss Charges Removed, Promising Lower Power Bills

MANILA, Philippines — The Bureau of Internal Revenue (BIR) has removed the 12-percent value-added tax (VAT) on system loss charges in electricity bills effective immediately, a move the Department of Energy (DOE) earlier estimated may lower power costs for consumers by about 5 to 10 percent. Under Revenue Memorandum Circular No. 097-2026 published on Monday, the directive is effective immediately. System loss refers to the electricity that is lost during the transmission and distribution process from power generation facilities to end-users. This includes technical losses, such as those due to the resistance of wires, and non-technical losses, like pilferage and metering inaccuracies. The VAT on these system loss charges had been a point of contention for consumers, adding to the overall cost of electricity. The DOE's estimate suggests a tangible reduction in monthly bills for households. This initiative aligns with President Ferdinand "Bongbong" Marcos Jr.'s commitment in his State of the Nation Address (SONA) to provide relief to Filipino consumers from high utility costs. The government anticipates that lower power bills will lead to increased disposable income for households, potentially boosting consumption and economic activity. Filipino households, especially those in lower-income brackets, often allocate a substantial portion of their budget to electricity expenses. The immediate implementation of the VAT removal is expected to offer much-needed financial relief.