By Dean Aubrey Caratiquet
In line with President Ferdinand R. Marcos Jr.’s orders to ease the burden of electricity costs passed on to consumers, concerned agencies came together to address the issue.
This, as the Bureau of Internal Revenue (BIR) issued Memorandum Circular No. 097-2026, which calls for system loss charges within the gross sales of generation companies, the National Grid Corporation of the Philippines (NGCP), and distribution utilities to be exempted from value added tax (VAT).
The tax-exempt system loss charges fall within the cap approved by the Energy Regulatory Commission under Resolution No. 26, s. 2026, thus categorizing this among other government-mandated charges excluded from VAT computation.
The Circular reads, “Such exclusion shall likewise be subject to the applicable provisions of the Tax Code and its implementing rules and regulations goveming the determination of Gross Sales, invoicing requirements, and the proper treatment of govemment-mandated charges.”
To ensure transparency, the allowable system loss charges shall be clearly and separately identified in the billing statement, invoice, or similar document pursuant to the ERC Resolution.
Moreover, all concerned power utility companies, electric cooperatives, the NGCP, and affected taxpayers are encouraged to ensure the proper billing, accounting, reporting, and separate identification of this line item in compliance with applicable ERC regulations and the applicable provisions of the Tax Code.
The Circular shall take effect immediately and shall be applied prospectively from its effectivity and from the effectivity of ERC Resolution No. 26, s. 2026.
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