Manila, Sept. 14 -- The Bureau of Internal Revenue (BIR) issued a memorandum circular on Monday, removing the value-added tax (VAT) on the allowable system loss charge within the cap approved by the Energy Regulatory Commission (ERC).

Memorandum Circular No. 97-2026 circularizes ERC Resolution No. 26 and formally recognizes the allowable system loss charge within the ERC-approved cap as a government-mandated charge excluded from gross sales for VAT purposes.

The BIR said it is therefore not subject to output VAT and creditable withholding on VAT.

The exclusion, however, does not extend to income tax and the corresponding creditable withholding tax.

The BIR said the removal of the VAT on system is in line with President Ferdinand R. Ma...