Electricity consumers could soon see lower power bills as the Bureau of Internal Revenue (BIR) prepares to remove the value-added tax on the allowable system loss charge.

BIR commissioner Charlito Martin R. Mendoza said the agency will issue a Revenue Memorandum Circular clarifying that the charge is not subject to VAT, following the Energy Regulatory Commission’s (erc) classification of it as a government-mandated pass-through cost.

The BIR will release the circular after the required 15-day period following the publication of ERC Resolution No. 26, Series of 2026.

Reforms delivering results people can immediately feel

“As Finance Secretary Frederick Go has consistently guided us, our reforms should deliver results that people can immediately feel. When there is a clear basis under the law to provide tax relief, we should act on it,” Mendoza said.

“We are preparing the BIR issuance now so that after the required period has lapsed, we can immediately implement the VAT removal and pass the benefit on to electricity consumers,” he added.

The system loss charge covers electricity that is lost as power moves through transmission and distribution networks. Under the ERC resolution, the amount is treated as a cost recovered through electricity bills rather than income earned by power generators, the National Grid Corporation of the Philippines and distribution utilities.

Non-VAP payment of electricity not reaching homes

“In simple terms, consumers should not be paying VAT on electricity that never actually reaches their homes or businesses. A pass-through charge is a cost collected from consumers and passed on to the proper recipient. Removing VAT from that charge means a lower amount will be passed on to electricity consumers,” Mendoza said.

The planned measure follows the BIR’s earlier clarification on the tax treatment of government-mandated electricity charges.

Under Revenue Memorandum Circular No. 60-2026 issued in June, the agency said the Lifeline Subsidy, Green Energy Auction Allowance and other specified government-mandated charges are not subject to output VAT and related creditable withholding taxes.

The BIR said it will continue reviewing tax rules where their proper application could provide direct relief to consumers and taxpayers.