Republic of the Philippines​
HOUSE OF REPRESENTATIVES​
Quezon City 
TWENTIETH CONGRESS 
First Regular Session​
HOUSE BILL NO. ____ 
Introduced by REP. BERNADETTE “DETTE” G. ESCUDERO 
AN ACT  
EXEMPTING ELECTRICITY SALES FROM VALUE-ADDED TAX, FURTHER 
AMENDING FOR THE PURPOSE SECTIONS 108 AND 109 OF THE NATIONAL 
INTERNAL REVENUE CODE, AS AMENDED 
EXPLANATORY NOTE 
“Electricity can transform people’s lives, not just economically but also 
socially.”​
 — Piyush Goyal, Minister of Commerce & Industry, India 
Electricity is a basic necessity that powers households, sustains livelihoods 
and businesses, and serves as a foundational driver of national economic 
development. Its availability and affordability are directly tied to the promotion of 
general welfare, the advancement of social justice, and the realization of the State’s 
duty under Article XII, Section 1 of the 1987 Constitution to ensure equitable access 
to basic goods and services. As such, ensuring reasonable electricity costs is a 
matter of public interest and legislative concern. 
However, the cost of electricity in the Philippines remains among the highest 
in Southeast Asia. Over half of a typical household’s electricity bill is made up of 
generation charges, largely due to the country’s reliance on imported fuel sources 
such as coal and liquefied natural gas (LNG). More than 50% of power plants in the 
Philippines are dependent on these imported fuels, making electricity rates 
vulnerable to global price volatility and foreign exchange fluctuations—particularly 
the U.S. dollar. Recent LNG imports alone have cost the country tens of millions of 
dollars, with these costs ultimately passed on to consumers through power supply 
agreements (PSAs) between producers and distribution utilities. These PSAs often 
include pass-through provisions that allow power suppliers to transfer increased 
generation costs directly to end users, further burdening households financially. 
Currently, Sections 108 and 109 of the National Internal Revenue Code 
(NIRC), as amended, impose Value-Added Tax (VAT) on the sale of electricity by 
generation, transmission, and distribution companies, with limited exceptions for 
1 
July 17, 2025
4:02 pm
2097


certain renewable energy providers. This blanket imposition disproportionately 
affects low-income households and rural communities, where power distribution is 
often less efficient and more expensive. According to the Philippine Institute for 
Development Studies (PIDS), consumers in some provinces spend up to 20% of their 
monthly income on electricity alone—significantly reducing their ability to afford 
food, education, and health care. 
In addition, VAT on electricity increases production costs for micro, small, and 
medium enterprises (MSMEs), which comprise 99.58% of all business establishments 
in the country, based on 2023 data from the Department of Trade and Industry 
(DTI). In provinces where local economies rely on agribusiness, retail, and cottage 
industries, high electricity costs stifle productivity, limit employment, and discourage 
growth. 
This proposed measure—reintroduced by several authors in the Nineteenth 
Congress—seeks to exempt the sale of electricity from VAT by amending Sections 
108 and 109 of the NIRC. The bill aims to reduce the cost of power, provide 
meaningful relief to ordinary consumers, and boost the competitiveness of local 
enterprises, especially in underserved and energy-challenged areas. 
In view of the foregoing, the immediate and favorable enactment of this 
measure is earnestly sought. 
HON. BERNADETTE “DETTE” G. ESCUDERO 
Representative 
1st District, Sorsogon 
2 


Republic of the Philippines​
HOUSE OF REPRESENTATIVES​
Quezon City 
TWENTIETH CONGRESS 
First Regular Session​
HOUSE BILL NO. ____ 
Introduced by REP. BERNADETTE “DETTE” G. ESCUDERO 
AN ACT  
EXEMPTING ELECTRICITY SALES FROM VALUE-ADDED TAX, FURTHER 
AMENDING FOR THE PURPOSE SECTIONS 108 AND 109 OF THE NATIONAL 
INTERNAL REVENUE CODE, AS AMENDED 
Be it enacted by the Senate and House of Representatives of the Philippines 
in Congress assembled: 
SECTION 1. Section 108 of the National Internal Revenue Code of 1997, as 
amended, is hereby further amended to read as follows: 
“Sec. 108. Value-added Tax on Sale of Services and Use or 
Lease of Properties. - 
“(A) Rate and Base of Tax. – There shall be levied, assessed and 
collected, a value-added tax equivalent to twelve percent (12%) of 
gross receipts derived from the sale or exchange of services, including 
the use or lease of properties.  
“The phrase “sale or exchange of services” means the 
performance of all kinds of services in the Philippines for others for a 
fee, remuneration or consideration, including those performed or 
rendered by construction and service contractors; stock, real estate, 
commercial, customs and immigration brokers; lessors of property, 
whether personal or real; warehousing services; lessors or distributors 
of cinematographic films; persons engaged in milling processing, 
manufacturing or repacking goods for others; proprietors, operators or 
keepers of hotels, motels, rest houses, pension houses, inns, resorts; 
proprietors or operators of restaurants, refreshment parlors, cafes and 
other eating places, including clubs and caterers; dealers in securities; 
lending investors; transportation contractors on their transport of 
goods or cargoes, including persons who transport goods or cargoes 
for hire another domestic common carriers by land relative to their 
1 
2097


 
transport of goods or cargoes; common carriers by air and sea relative 
to their transport of passengers, goods or cargoes from one place in 
the Philippines to another place in the Philippines; [sales of electricity 
by generation companies, transmission by any means entity, and 
distribution companies, including electric cooperatives;] services of 
franchise grantees of [electric utilities,] telephone and telegraph, radio 
and television broadcasting and all other franchise grantees except 
those under section 119 of this Code, and non-life insurance 
companies (except their crop insurances), including surety, fidelity, 
indemnity, and bonding companies; and similar services regardless of 
whether or not the performance thereof calls for the exercise or use of 
the physical or mental faculties. The phrase “sale or exchange of 
services” shall likewise include: 
“x x x.”​
 
Sec. 2. Section 109 of the National Internal Revenue Code of 1997, as 
amended, 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. 
“X x x. 
“(BB) X x x. 
“(CC) 
SALE 
OF 
ELECTRICITY 
BY 
GENERATION, 
TRANSMISSION, 
AND 
DISTRIBUTION 
COMPANIES 
AND 
ELECTRIC 
COOPERATIVES; 
“(DD) SERVICES OF FRANCHISE GRANTEES 
OF ELECTRIC UTILITIES; AND 
“(EE) [(CC)] x x x.” 
 
Sec. 3. Separability Clause. – If any provision of this Act or the application 
of such provision to any person or circumstance is declared invalid, the remainder of 
the Act or the application of such provision to other persons or circumstances shall 
not be affected thereby. 
Sec. 4. Repealing Clause. – All laws, decrees, administrative issuances, 
rules and regulations, and orders or parts thereof inconsistent with this Act are 
deemed repealed or modified accordingly.  
Sec. 5. Effectivity. – This Act shall take effect after fifteen (15) days 
following the completion of its publication in the Official Gazette or in two (2) 
national newspapers of general circulation, whichever comes first. 
2 
 


 
 
Adopted, 
3