Manila: The Bureau of Internal Revenue (BIR) is set to issue a memorandum circular removing the value-added tax (VAT) on allowable system loss charges in electricity bills. This action is in line with President Ferdinand R. Marcos Jr.'s directive to review and clarify tax rules that can provide immediate relief to consumers, the BIR announced in a statement.

According to Philippines News Agency, the Revenue Memorandum Circular will be issued after 15 days from the publication of Energy Regulatory Commission (ERC) Resolution No. 26, Series of 2026. This resolution classifies the system loss charge as a government-mandated pass-through cost. BIR Commissioner Charlito Martin Mendoza emphasized that the agency is preparing the issuance to ensure the tax relief takes effect after the legally required period.

Finance Secretary Frederick Go has emphasized that reforms should deliver results that people can feel immediately. Mendoza highlighted that when there is a clear legal basis to provide tax relief, action should be taken. The move aligns with ERC Resolution No. 26, Series of 2026, which considers the allowable system loss charge as a recovered cost through electricity bills rather than income earned by generation companies, the National Grid Corporation of the Philippines, and distribution utilities.

Mendoza explained that consumers should not be paying VAT on electricity that does not actually reach 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. He also noted that the bureau will continue reviewing tax rules to identify areas where proper application can provide practical relief to taxpayers, ensuring that relief is clear, immediate, and felt by the people.