RMC No. 97-2026 redacted

This circular publishes ERC Resolution No. 26, Series of 2026, which declares the allowable System Loss Charge (within the cap approved by the ERC) a government-mandated pass-through cost that does not form part of the gross sales of Generation Companies, the NGCP, and Distribution Utilities for VAT purposes. It further amends Q&A No. 3 of RMC No. 116-2024 (as amended by RMC No. 60-2026) so that the allowable System Loss Charge is excluded from gross sales for VAT computation and is consequently not subject to output tax or creditable withholding on VAT, provided it is separately identified in the billing statement, invoice, or similar document. The exclusion does not extend to income tax or the corresponding creditable withholding tax. Gen Cos, NGCP, DUs, electric cooperatives, and other affected taxpayers must ensure proper billing, accounting, reporting, and separate identification of the charge. The circular takes effect immediately and applies prospectively.