Manila: The Bureau of Internal Revenue (BIR) has clarified that the Lifeline Subsidy and the Green Energy Auction Allowance (GEA-All) on electricity bills are exempt from value-added tax (VAT) and withholding tax. The agency emphasized that these charges are collected by power distributors on behalf of other entities.
According to Philippines News Agency, this clarification was detailed in Revenue Memorandum Circular (RMC) No. 60-2026, which amends previous guidelines under RMC No. 116-2024. The BIR classified these charges as pass-through collections, akin to other government-mandated charges within the power sector. This comes amid efforts by regulators to expand electricity subsidies for low-income households and bolster support for renewable energy projects.
The circular outlines that distribution utilities and electric cooperatives are not required to treat collections for the Lifeline Subsidy and GEA-All as part of their revenues, gross sales, or taxable income. BIR Commissioner Charlito Martin Mendoza explained, "These amounts do not belong to the distribution utilities or electric cooperatives, do not form part of their revenues, taxable income, or gross sales. This is why the Circular clarifies that they should not be subject to output VAT or creditable withholding taxes." He further added that these are regulatory, government-mandated charges that are collected and remitted to the appropriate entities.
The Lifeline Subsidy was established through an Energy Regulatory Commission (ERC) resolution to create a uniform nationwide subsidy program for low-income electricity consumers. Meanwhile, the GEA-All was introduced to support the government's Green Energy Auction program, which aims to increase the renewable energy capacity in the country's power mix.
Commissioner Mendoza stated that the BIR ruling aligns the tax treatment of these charges with their function under the ERC regulatory framework. "This is not a grant of a new tax exemption. Rather, it ensures that the tax treatment of these ERC-mandated charges is consistent with their nature as pass-through collections and with other charges in the power sector," Mendoza stated.
He also explained that this measure is expected to contribute to lower electricity costs for consumers by preventing the imposition of additional tax burdens on amounts that do not constitute utility income or gross sales. The BIR highlighted that this issuance supports the implementation of the Ease of Paying Taxes Act and complements government efforts to alleviate rising power costs while promoting the country's transition to clean energy.
