RMC No. 97-2026 — Circularizing Energy Regulatory Commission Resolution No. 26, Series of 2026, Declaring the System Loss Charge as a Government-Mandated Pass-Through Cost Not Forming Part of the Gross Sales of Generation Companies, National Grid Corporation of the Philippines, and Distribution Utilities for Value-Added Tax Purposes, and Further Amending Revenue Memorandum Circular No. 116-2024 Di

REPI,IBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE National Office Building Quezon City BACONG Bringing In Revenues PILIP'NAS for Nation-building September 14, 2026 REVENUD MEMORANDUM-CIRCULAR NO. 9 0 26 SUBJECT Circularizing Energt Regulatory Commission Resolution No. 26, Seies oJ 2026, Declaring the System Loss Charge as a Government-Mandated Pass- Through CostNot Forming Part of the Gross Sales ofGeneration Companies, National Grid Corporation of the Philippines, and Distribution Utilities for Value-Added Tax Purposes, and Further Amending Revenue Mernorandum Circular No. 116-2024 TO : All Internal Revenue OffiCials, Employees and Others Concerned For the information and guidance of all intemal revenue officials, employees, and others concemed, attached herewith as Amex "A" is a copy of Energy Regulatory Commission (ERC) Resolution No. 26, Seies of2026,1 entitled "A Resolution Declaring the System Loss Charge as a Government-Mandated Pass-Through Cost Not Forming Part of the Gross Sales of Generation Companies, National Grid Corporation of the Philippines, a d Distribution Utilities for Value' Added Tax Purposes and Ammding Pertinent Provisions ofERC Resolution No. 20, Series of2005' and ERC Resolution No. 14, Series of 2022." In its Resolution No. 26, Series of 2026, the ERC declared the allowable System Loss Charge, within the cap approved by the ERC pursuant to its rules and regulations, as a govemment- mandated pass-through cost that does not form part of the gross sales of Generation Companies (Gen Cos), the National Grid Corporation of the Philippines (NGCP), and Distribution Utilities (DUs) for Value-Added Tax (VAT) purposes. Section 108 of the National Intemal Revenue Code of 1997, as amended (Tax Code), imposes VAT on the gross sales derived from the sale or exchange of services, including digitaL services, and the use or lease of properties. Gross sales means the total amount of money or its equivalent representlng the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services during the taxable quarter for the services performed for another person, which the purchaser pays or is obliged to pay to the seller in consideration of the sale, barter or exch.nge or services that has already been rendered by the seller and the use or lease ofproperties that have already been supplied by the seller excluding value-added tax and those amounts earmarked for payment to third (3') party or received as reimbursement for palment on behalf of another which do not redound to the benefit ofthe seller as provided under relevant laws, rules or regulations BUREAU OF INTERNAI., REVENUE RECOROS MAN AGErvltNl D!vlSlON o sEP 14 2026 o I Approved by ERC on Augost 26, 2026 - o o ADMIN UNI T - 1 ,^.-,. BY: Itut:-H BIR National Office Bldg., Senator Miriam Defensor-Santiago Avenue, Diliman, Quezon City W ebsitet www. bi r.gov. ph Trunkline: 8981-7000 ; 8929-7676

Accordingly, Q&A No. 3 of Revenue Memorandum Circular (RMC) No. 116-2024,2 as amended by RMC No. 60-2026,3 is hereby further amended to recognize and confirm the allowable System Loss Charge within the cap approved by ERC under Resolution No. 26, Series of 2026 and other applicable ERC rules and regulations as one ofthe govemment-mandated charges excluded from Gross Sales for purposes ofVAT computation and, consequently, not subject to Output Tax and Creditahle Withholding on VAT. This exclusion, however, shall not extend to income tax and the corresponding creditable withholding tax. For VAT purposes, the allowable System Loss Charge shall be excluded from Gross Sales, provided that it is separately identified in the billing statement, invoice, or similar document in accordance with ERC Resdlution No. 26, Series of 2026 and other applicable ERC rules and regulations. Such exclusion shall likewise be subject to the applicable provisions ofthe Tax Code and its implementing rules and regulations goveming the determination of Gross Sales, invoicing requirements, and the proper treatment of govemment-mandated charges' A1l concemed Gen Cos, NGCP, DUs, electric cooperatives, and other affected taxpayers ihall ensure the proper billing, accounting, reporting, and separate identification ofthe allowable System Loss Charge in accordance with applicable ERC rules and regulations and the applicable provisions ofthe Tax Code and its implementing rules and regulations. This Circular shall take effect immediately and shall be applied prospectively fiom its effectivity and from the effectivity ofERC Resolution No. 26, Series of2026 pursuant to Sections 12, 14 and 17 thereof. All intemal revenue officials and employees are enjoined to give this Circular as wide a publicity as possible. CHANLITO MARTIN R. MENDO C ommi s s ioner of Internal K-1-FFR a \E7 ., 9,0J, ,$$ -q J-,9,,,.,, * RECORDS MANAGfMENT OIVISION sEP 142026 R ADMIN UNI T-1 ,..-, BYi TIME. lu l -z.q , Chrirying lhe Provisions of Republic Act No. I 1976, or Otherwise Knonm as the 'Ease of Paying 'fues Act'', Applicable to the Power Indusey. 3 Amendment ofRevenue Memorandum Circular No. 1t6-2024, re: Inclusion oflifelinc Subsidy atrd Gree! Eftrgy Audion Alowance as Goverffnent Mandated Chars$ Not Subject to Output Tax and Crcditablc Withholding on VAT md IDcome.