Legarda: “Sa wakas, wala nang VAT ang system loss” – Other charges tomorrow, refund must follow

Senator Loren Legarda said the Bureau of Internal Revenue’s removal of value-added tax on allowable system loss charges marks an important step toward fairer electricity bills, months after she first brought the issue squarely into the Senate’s energy-crisis discussions and pushed for action before it became a broader public issue. As early as March 2026, Legarda had already questioned the VAT treatment of system loss and other electricity charges and filed legislation seeking to address the issue.

The BIR issued Revenue Memorandum Circular No. 97-2026 on September 14, 2026, recognizing the allowable System Loss Charge within the cap approved by the Energy Regulatory Commission as a government-mandated pass-through cost. As a result, it will no longer form part of the gross sales of generation companies, the National Grid Corporation of the Philippines, and distribution utilities for VAT purposes.

Legarda was among the earliest public officials to squarely question the imposition of VAT on system loss and other components of electricity bills as consumers struggled with rising energy costs during the first Senate PROTECT Committee hearings in March 2026. She had also filed Senate Bill No. 1963 on March 11, before the issue later drew wider attention.

“Noong Marso pa lang, tinapat ko na ang mga ahensya noong unang PROTECT hearing: bakit hindi tanggalin ang VAT sa system loss at iba pang charges? Bakit kailangang magbayad pa ng VAT ang consumer sa mga singil na hindi naman nila napakinabangan? At bago pa man ang PROTECT, naghain na tayo ng panukala para magkaroon ng malinaw at patas na batayan sa pagbubuwis, hindi lang sa system loss kundi kasama na rin ang lifeline at iba pang electricity charges, sa Senate Bill No. 1963 o ang VAT Treatment of Socialized Electricity Subsidies and Statutory Charges Act. Sa wakas, wala nang VAT ang system loss,” Legarda said.

Legarda explained that the measure will provide immediate relief to Filipino families. Based on average MERALCO residential rates in 2025, a household consuming 200 kWh a month paid about ₱137 in system loss charges. Removing the 12% VAT on that amount could mean savings of around ₱16 a month, or nearly ₱200 a year. For a residential consumer using 600 kWh a month, the savings could reach about ₱49 monthly, or close to ₱600 a year.

“Pero tandaan natin, VAT sa system loss pa lang ito. Maliit pa ang bawas ngayon, pero may iba pang charges sa electric bill na puwede pa nating tingnan. Kaya nga naghain tayo ng panukala para alisin din ang VAT sa iba pang singil sa kuryente. Ipinakita ng BIR na may mga bagay na puwede naman palang ayusin sa tamang pagpapatupad ng batas, kahit hindi na hintayin ang panibagong batas. Sana tingnan din ng BIR at iba pang ahensya kung saan pa puwedeng magbawas para gumaan naman kahit kaunti ang buwanang bayarin ng consumers,” Legarda said.

Legarda stressed that the move forms part of her broader consumer and tax-relief agenda. Earlier this year, she filed Senate Bill No. 1851 to reduce the general VAT rate from 12% to 10%, Senate Bill No. 1857 to ease taxes on basic goods, essential utilities, and medical services, Senate Bill No. 2255 or the KITA Act to increase workers’ take-home pay, and Senate Bill No. 2435 to strengthen fuel security, price transparency, and consumer protection during fuel emergencies. “Magkakaugnay ang lahat ng ito. Kapag mataas ang kuryente, gasolina, pagkain at gamot, lumiit ang tunay na halaga ng sahod. Kaya kailangan nating dagdagan ang naiuuwi ng manggagawa at bawasan ang mga buwis at singil na nagpapabigat sa pamilya,” Legarda said.

Legarda pointed out that current tax reforms and relief measures are only the beginning. Because consumers have been incorrectly charged taxes that should not have been imposed, she said the government should explore all available legal means to refund or credit these misbilled amounts.

“Ngayong malinaw na mali ang pagbubuwis sa taumbayan sa allowable system loss, dapat lang hanapan ng paraan ng pamahalaan na maibalik o ma-credit sa consumers ang VAT na maling nasingil sa kanila. Refund must follow,” Legarda said.

She added that the BIR, ERC, DOE, and other concerned agencies should examine every available mechanism under existing law to provide relief, whether through refunds, bill credits, tax credits, or other lawful means.

Finally, the Senator called on consumers to keep a closer watch on their electricity bills and report questionable charges.

“Sa mga consumers, bantayan natin ang ating bill. Tingnan kung tama ang mga singil at kung may charge na hindi malinaw, itanong agad sa distribution utility at ipaalam din sa ERC. Maaari ring i-save o kuhanan ng litrato ang bill para may record tayo. Kung may nakitang mali o hindi maipaliwanag na singil, huwag palampasin. I-report agad para maimbestigahan at maitama,” Legarda said.

RMC No. 97-2026 takes effect immediately and will be applied prospectively in accordance with the effectivity provisions of ERC Resolution No. 26, Series of 2026. (30)