PHILIPPINES — Power consumers can expect a reduction of around ₱20 in their monthly electricity bills following the removal of the value-added tax on system loss charges. Energy Secretary Sharon Garin announced the estimate on September 15, 2026, as the Bureau of Internal Revenue began implementing Revenue Memorandum Circular No. 97-2026.
Concrete Relief for Households
The circular removes the allowable system loss charge, based on the cap approved by the Energy Regulatory Commission, from government-mandated collections under gross sales for VAT purposes. The charge is no longer subject to output VAT and creditable withholding on VAT, though the exclusion does not extend to income tax.
Garin said the DOE welcomes the BIR decision even if it falls under the Department of Finance's jurisdiction. She described the measure as part of a whole-of-government approach to easing electricity costs. The directive aligns with President Ferdinand Marcos Jr.'s push for measures that provide practical relief to consumers.
A Gradual Path to Zero System Loss
The Energy Secretary clarified that the BIR can only remove the excise tax on system loss, not the charge itself. Removing the charge entirely would require action under the Electric Power Industry Reform Act, the ERC, the National Electrification Administration, or the DOE.
Garin revealed that the government is working on a gradual reduction of system loss charges toward zero. She acknowledged this will take time to avoid endangering the financial viability of electric cooperatives. An abrupt removal could force them to absorb losses immediately and jeopardize their operations.
No New Taxes to Offset Revenue Loss
Malacañang assured the public that no new taxes will be imposed to cover the estimated ₱10-billion annual revenue loss from the VAT removal. Palace Press Officer Undersecretary Claire Castro said the government is not currently discussing additional tax measures to replace the foregone revenue.
Castro pointed to alternative revenue sources such as improved tax collection efficiency, VAT on digital services, and the CREATE MORE Act. She emphasized that the policy's purpose is to ease the burden of soaring power bills, not to immediately find replacement revenue. The goal is to help Filipinos cope with the high cost of goods.
Billing Adjustments and Compliance
Generation companies, the National Grid Corporation of the Philippines, distribution utilities, and electric cooperatives must ensure proper billing and separate identification of the allowable system loss charge. The charge must appear as a distinct line item in billing statements and invoices for VAT purposes.
The circular took effect immediately upon issuance. Consumers will see the adjustment reflected in upcoming billing statements once utilities update their systems. BIR Commissioner Charlito Mendoza emphasized that every peso saved counts and that the agency will continue pursuing practical reforms within its authority.
