BIR says lifeline subsidy, green energy allowance not taxable

MANILA, Philippines — 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 under Revenue Memorandum Circular (RMC) No. 60-2026 issued on June 4.

The circular amends RMC No. 116-2024 by adding the Lifeline Subsidy and GEA-All to the list of government-mandated charges treated as pass-through collections and therefore not subject to output VAT and creditable withholding tax on VAT and income.

BIR Commissioner Charlito Martin R. Mendoza said distribution utilities and electric cooperatives merely act as collecting agents for the charges under the regulatory framework of 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,” Mendoza said. “These are government-mandated charges, regulatory in nature, that are collected and remitted to the proper entities.”

The BIR said the amendment follows ERC Resolution No. 02, Series of 2026, which established the Uniform National Lifeline Subsidy Program, and ERC Resolution No. 6, Series of 2025, covering the Green Energy Auction Allowance.

Under the ERC framework, the Lifeline Subsidy is collected by distribution utilities and electric cooperatives to help fund subsidized electricity rates for qualified low-income and marginalized households. The GEA-All, meanwhile, is collected to support the government’s renewable energy initiatives through the Green Energy Auction Program.

Mendoza said the clarification does not create a new tax exemption but aligns the tax treatment of the charges with their nature as pass-through collections.

“This is not a grant of a new tax exemption,” he said. “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.”

According to the BIR, the measure is expected to help prevent additional tax burdens on charges that do not constitute utility income or gross sales, potentially contributing to lower electricity costs for consumers.

The agency said the circular supports the implementation of Republic Act No. 11976, or the Ease of Paying Taxes Act, and aligns with the administration’s efforts to protect consumers from rising energy costs while promoting renewable energy development. /dm