BIR moves to remove VAT from system loss charges

Cutting about ₱22 from a 200-kWh Meralco bill.

Electricity bills could get a little cheaper as the Bureau of Internal Revenue moves to remove VAT from the allowable system loss charge, a cost that households and businesses currently shoulder through their power bills.

The BIR said it will issue a memorandum removing VAT from the charge 15 days after the Energy Regulatory Commission’s Resolution No. 26, Series of 2026 is published. The resolution was published last week.

The ERC resolution classifies the allowable system loss charge as a government-mandated pass-through cost, meaning it is recovered through electricity bills rather than treated as income earned by generation companies, the National Grid Corporation of the Philippines and distribution utilities.

The savings could be modest on an individual bill, but they add up. Using Meralco’s August system loss charge of ₱0.9218 per kWh as an illustration, a household consuming 200 kWh would have about ₱184 in system loss charges.

Removing the 12% VAT from that component would mean roughly ₱22 less on the monthly bill, assuming the same rate and consumption. Actual savings will vary by utility, consumption and monthly charges.

The BIR said it is preparing the issuance so the VAT removal can take effect once the required 15-day period has elapsed. The move follows President Ferdinand Marcos Jr.’s directive to review tax rules that could provide immediate relief to consumers.

The measure also builds on the BIR’s earlier clarification covering other government-mandated electricity charges, including the Lifeline Subsidy and Green Energy Auction Allowance.

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