The Bureau of Internal Revenue (BIR) has clarified that the Lifeline Subsidy and the Green Energy Auction Allowance (GEA-All) are not subject to value-added tax (VAT) and withholding tax, confirming their treatment as pass-through charges under existing rules.

In Revenue Memorandum Circular (RMC) No. 60-2026 issued on June 4, the agency amended RMC No. 116-2024 to explicitly include the Lifeline Subsidy and GEA-All in the list of government-mandated charges treated as pass-through collections.

Under the clarification, distribution utilities (DU) and electric cooperatives (EC) are recognized as mere collecting agents for these charges under Energy Regulatory Commission (ERC) frameworks, rather than income earners.

“These amounts do not belong to the distribution utilities or electric cooperatives, do not form part of their revenues, taxable income, or gross sales,” BIR Commissioner Charlito Martin R. Mendoza explained. 

“This is why the Circular clarifies that they should not be subject to output VAT or creditable withholding taxes. These are government-mandated charges, regulatory in nature, that are collected and remitted to the proper entities,” the Commissioner said.

He added that the move is not a new tax exemption but a clarification of existing treatment under regulatory policy.

“This, in turn, 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,” Mendoza said.

The Lifeline Subsidy, under the ERC framework, supports discounted electricity rates for low-income and marginalized households. 

GEA-All funds support renewable energy development under the Green Energy Auction Program.

The clarification follows ERC issuances—Resolution No. 02, Series of 2026, establishing the Uniform National Lifeline Subsidy Program, and Resolution No. 6, Series of 2025, governing the GEA-All mechanism.

The issuance is aligned with the government’s implementation of Republic Act No. 11976 or the Ease of Paying Taxes (EOPT) Act, as well as broader efforts to streamline tax compliance and reduce administrative and cost burdens in regulated sectors, including energy.

How significant is this clarification for electricity pricing transparency and cost pass-through in the Philippine power sector? Share your views.

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