Republic of the Philippines 
HOUSE OF REPRESENTATIVES 
Batasan Hills, Quezon City 
NINETEENTH CONGRESS 
First Regular Session 
HOUSE BILL No. _____ 
-------------------------------------------------------------------------------------------------------- 
Introduced by  
ACT Teachers Party-List Rep. FRANCE L. CASTRO,  
GABRIELA Women’s Party Rep. ARLENE D. BROSAS,  
and KABATAAN Party-List Rep. RAOUL DANNIEL A. MANUEL 
-------------------------------------------------------------------------------------------------------- 
AN ACT 
EXEMPTING THE SYSTEM LOSS CHARGE COMPONENT IN THE SALE 
OF ELECTRICITY BY DISTRIBUTION COMPANIES AND ELECTRIC 
COOPERATIVES FROM THE COVERAGE OF THE VALUE ADDED TAX, 
AMENDING FOR THE PURPOSE SECTION 109 OF THE NATIONAL 
INTERNAL REVENUE CODE OF 1997, AS AMENDED 
EXPLANATORY NOTE 
This Bill was first filed as House Bill 5543 in the 16th Congress by Bayan Muna 
Partylist Representatives Neri Colmenares and Carlos Isagani Zarate. It was refiled as 
HB 1616 in the 17th Congress and was passed by the House of Representatives on third 
reading. It was refiled again as HB 245 during the 18th Congress. 
Value-Added Tax (VAT) is a form of sales tax. It is a tax on consumption levied 
on the sale, barter, exchange or lease of goods or properties and services in the 
Philippines and on importation of goods into the Philippines. 
VAT is an indirect tax. It is shifted or passed on to the buyer, transferee or lessee 
of goods, properties or services. Being a pass-on tax, the burden of paying the VAT is 
therefore ultimately left upon the shoulders of the final consumers — the consuming 
public. 
November 9,  2022
1:51 pm
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System Loss charge, on the other hand, is that part of one's electric bill 
representing the cost of electricity lost during transmission, pilferage, and due to 
technical and administrative inefficiency. Even pilfered power and the electricity used 
by the distribution companies (i.e. Meralco) and electric cooperatives are passed on to 
consumers. Thus, the people are made to pay more than the cost of electricity they have 
actually consumed. In a report by independent think-tank Ibon Foundation, the system 
loss charge comprises about 8% of the total electricity bill. Worse, this System Loss 
charge is subjected to the coverage of VAT which further drives electricity bills up. 
 
As a tax on consumption, VAT ought to be imposed upon the goods and services 
people actually buy and consume. By its very definition therefore, the imposition of 
VAT upon this System Loss charge is unfounded and illegal as the people are taxed for 
goods/services they have not actually consumed.  
 
For instance, in 2013, based on Meralco's tariffs which averaged 24 US cents per 
kilowatt hour, the price Filipinos pay for their electricity is the fifth highest in the world. 
It also showed that electricity in the Philippines costs nearly twice that of Thailand's, 
while about five times that of Indonesia's. 
 
In another study conducted by the International Energy Consultants (IEC), a 
Perth-based consultancy firm commissioned by Meralco to conduct the study, the rates 
in Luzon are placed at ninth highest electricity tariffs of the 44 countries surveyed. 
 
Per the IEC study, the primary reason for such higher power rates as compared 
to other countries is the absence of government subsidies for electricity, unlike countries 
like Indonesia, Thailand, and Malaysia, where electricity rates are subsidized by the 
government. These subsidies comprise a large part of their public budget. In Indonesia, 
for example, energy subsidies account for 24.0 percent of their 2013 public expenditure 
plan. 
 
With this backdrop, along with the rising prices of consumer goods and 
commodities, fuel, education and medical costs, worsening inflation, and unabated 
sinking of the purchasing power of peso, it is high time that the Congress devise means 
which could readily help in keeping the pockets of Filipinos, especially those corning 
from the lower income class, from completely running dry. 
 
Thus, this Bill seeks to amend the National Internal Revenue Code of 1997, as 
amended by Republic Acts 9377 and 10378, by exempting the System Loss charge 
component in the electricity bills from the coverage of the Value Added Tax. 
 


Passage of this bill is thus earnestly sought. 
Approved, 
________________________________ 
Rep. FRANCE L. CASTRO 
ACT Teachers Party-List 
________________________________ 
Rep. ARLENE D. BROSAS 
GABRIELA Women’s Party 
________________________________ 
Rep. RAOUL DANNIEL A. MANUEL 
KABATAAN Party-List 


Republic of the Philippines 
HOUSE OF REPRESENTATIVES 
Batasan Hills, Quezon City 
NINETEENTH CONGRESS 
First Regular Session 
HOUSE BILL No. _____ 
-------------------------------------------------------------------------------------------------------- 
Introduced by  
ACT Teachers Party-List Rep. FRANCE L. CASTRO,  
GABRIELA Women’s Party Rep. ARLENE D. BROSAS,  
and KABATAAN Party-List Rep. RAOUL DANNIEL A. MANUEL 
-------------------------------------------------------------------------------------------------------- 
AN ACT 
EXEMPTING THE SYSTEM LOSS CHARGE COMPONENT IN THE SALE 
OF ELECTRICITY BY DISTRIBUTION COMPANIES AND ELECTRIC 
COOPERATIVES FROM THE COVERAGE OF THE VALUE ADDED TAX, 
AMENDING FOR THE PURPOSE SECTION 109 OF THE NATIONAL 
INTERNAL REVENUE CODE OF 1997, AS AMENDED 
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled: 
SECTION 1. Section 109 of the National Internal Revenue Code of 1997, as amended 
by Republic Act No. 9337 and Republic Act No. 10378, is hereby further amended to 
read as follows: 
"SEC. 109. Exempt Transactions. — (1) Subject to the provisions of subsection 
(2) hereof, the following transactions shall be exempt from the value-added tax:
“(A) x x x 
“xxx 
“(S) x x x 
5994


“(T) x x x 
 
“(U) x x x 
“(V) x x x 
 
“(W) SYSTEM LOSS COMPONENT IN THE SALE OF ELECTRICITY 
BY DISTRIBUTION COMPANIES AND ELECTRIC COOPERATIVES; 
 
"[(W)] (X) x x x 
 
SECTION 2. Repealing Clause. — All laws, executive and administrative orders or 
parts thereof, inconsistent with any provision of this act are hereby repealed or modified 
accordingly. 
 
SECTION 3. Separability Clause. – If any provision of this Act is subsequently 
declared 
unconstitutional, the validity of the remaining provisions hereof shall remain in full 
force and effect. 
 
SECTION 4. Effectivity. — This act shall take effect after fifteen (15) days following 
the completion of its publication in the Official Gazette or in a national newspaper of 
general circulation. 
 
Approved,