BIR to scrap VAT on system loss charges
The Philippine Bureau of Internal Revenue plans to remove the 12-percent VAT on system loss charges for electricity. This policy change aims to lower monthly electricity bills for consumers by classifying these charges as government-mandated pass-through costs.
Why it matters
This move provides direct financial relief to households facing high utility costs, though it will result in approximately P10 billion in annual forgone government revenue.
MANILA, Philippines - The Bureau of Internal Revenue (BIR) is preparing to scrap the 12-percent value added tax (VAT) on allowable system loss charges, a move that could lower electricity bills.
In a statement yesterday, the BIR said it would issue a Revenue Memorandum Circular after the lapse of 15 days from the publication of the Energy Regulatory Commission (ERC)'s Resolution 26.
The resolution classifies system loss charge as a government-mandated pass-through cost.
"When there is a clear basis under the law to provide tax relief, we should act on it," BIR Commissioner Charlito Martin Mendoza said amid public clamor to reduce the cost of electricity.
"We are preparing the BIR issuance so that after the required period has lapsed, we can immediately implement the VAT removal and pass the benefit on to electricity consumers," Mendoza added.
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