BIR: Lifeline Subsidy, GEA-All not subject to VAT, withholding tax

The Bureau of Internal Revenue (BIR) on Friday said that Lifeline Subsidy and the Green Energy Auction Allowance (GEA-All) being charged by electricity distributors to its customers are not subject to value-added tax (VAT) and withholding tax.

In a statement, the BIR said it issued Revenue Memorandum Circular (RMC) No. 60-2026, which amended its RMC No. 116-2024 by adding the Lifeline Subsidy and the GEA-All to the list of government-mandated charges treated as pass-through collections and not subject to output VAT and creditable withholding tax on both VAT and income.

BIR Commissioner Charlito Martin Mendoza said that for both Lifeline Subsidy and GEA-All, distribution utilities such as electric cooperatives merely act as collecting agents under the regulatory framework established by the Energy Regulatory Commission (ERC).

“These amounts do not belong to the distribution utilities or electric cooperatives, do not form part of their revenues, taxable income, or gross sales. 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,” said Mendoza.

The amendments under RMC No. 60-2026 follow the issuance by the Energy Regulatory Commission (ERC) of Resolution No. 02, Series of 2026, establishing the Uniform National Lifeline Subsidy Program and ERC Resolution No. 6, Series of 2025, on the Green Energy Auction Allowance.

Under the ERC framework, the Lifeline Subsidy is collected by distribution utilities and electric cooperatives to support subsidized electricity rates for qualified low-income and marginalized households.

The GEA-All, meanwhile, is collected to support the government’s renewable energy initiatives under the Green Energy Auction Program.

“This is not a grant of a new tax exemption. Rather, it ensures that the tax treatment of these ERC-mandated charges is consistent with their nature as pass-through collections and with other charges in the power sector. 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,” added Mendoza.

The BIR said the latest circular is in line with Finance Secretary Frederick Go’s push to operationalize in full the objectives of Republic Act No. 11976, or the Ease of Paying Taxes (EOPT) Act, which seeks to promote uniform, equitable, and simplified compliance with existing tax laws and regulations.

The taxman added that the issuance is likewise aligned with President Ferdinand Marcos Jr.’s directive for whole-of-government efforts to protect consumers and vulnerable sectors from rising energy costs while supporting longer-term energy resilience and renewable energy development.

“This clarification contributes to that broader effort by ensuring that government-mandated charges intended for social protection and energy transition are not burdened by taxes that do not properly apply to them,” said Mendoza. — BAP, GMA News