Non-resident tourists will soon be entitled to a refund of the value-added tax (VAT) on local goods they purchased, as President Marcos signed into law on Monday, Dec. 9, a refund mechanism to boost the Philippines’ competitiveness as a shopping destination.
Under the measure, non-resident tourists may claim a refund on the VAT for goods personally purchased at accredited retail outlets, provided the goods are taken out of the country within 60 days and meet a minimum transaction requirement of P3,000.
During the signing of Republic Act No. 12079, Marcos said the VAT refund would stimulate more spending, promote the Philippines as a premier global shopping destination and put a spotlight on the country’s local products.
“It is no secret that shopping has become an essential part of the travel experience and we are poised to capitalize on that momentum,” the President said.
“This initiative opens a new chapter in our tourism landscape, allowing the country to compete with other tourism markets that attract tourists who are eager to take home authentic, high-quality Filipino products,” he added.
According to Marcos, the VAT refund will make the Philippines’ signature products such as Marikina shoes, intricate handwoven textiles from the northern provinces and Filipino barongs more accessible to global consumers and elevate the country’s stature in the global market.
“The economic impact of this measure is projected to be substantial, estimating an almost 30 percent increase in tourist spending. This surge will benefit both large-scale industries and micro, small and medium enterprises – an important pillar of our local economy,” he said.
“Tourists who have a positive shopping experience are more likely to return – with their friends and their families – supporting our goal to become a premier shopping destination in Southeast Asia.”
Based on estimates by the Bureau of Internal Revenue, forgone revenues from the measure range from P4.5 billion to P6 billion every year.
However, the Department of Tourism (DOT) said the forgone revenues would be more than compensated by tourists’ spending and the jobs to be created.
“The fact that tourism contributes no less than P3.36 trillion to the economy as a combined total for domestic and international spending, the forgone revenues will be more than well-paid… Moreover, it’s not just a comparison of what is forgone and what is obtained, but it should also be taken in the light of tourism employment,” Tourism Secretary Christina Frasco said in a chance interview.
“More tourist spending will mean more people employed in the tourism industry, with businesses thriving because it becomes a very attractive tourist shopping destination,” she added.
The law requires the Department of Finance (DOF) to engage the services of one or more reputable, globally recognized and experienced VAT refund operators to provide end-to-end solutions to the government for the establishment and operation of a system for tourists. The refund may be made either electronically or in cash.
The DOF secretary, after due consultation with relevant agencies, shall promulgate the implementing rules and regulations of the law within 90 calendar days from its effectivity.
“I urge the Department of Finance and the Bureau of Internal Revenue (BIR) to craft implementing rules and regulations that will make this VAT refund process simple, accessible and culturally inclusive,” Marcos said.
Law cheered
Frasco lauded the enactment of the law. “The passage of the VAT Refund Law for tourists is a monumental shift in enhancing the Philippine tourism experience,” she said in a statement.
“This law elevates our competitiveness as a premier destination in Asia, providing both economic incentives and a unique value proposition to visitors. It underscores our commitment to global standards while supporting local businesses,” she added.
“This program is not just about boosting revenue; it’s about providing a world-class experience that reflects the creativity and hospitality of the Filipino people,” she said.
The BIR also expressed full support for the newly enacted law.
“The BIR supports the VAT Refund Mechanism for Non-Resident Tourists law and the national government’s initiative of attracting more international tourists and travelers into the country,” BIR Commissioner Romeo Lumagui Jr. said in a statement.
“Excellent taxpayer service includes the granting of tax refund to taxpayers allowed by law to receive the same. This landmark law brings with it significant growth in tourism spending in the country, creating more economic growth in the sector, which in turn increases tax collections in the long run,” he said.
“The BIR will do its part in promoting the Philippines as a world-class tourist destination,” Lumagui added.
The Office of the Special Assistant to the President for Investment and Economic Affairs and the country’s group of retailers on Monday cheered the signing of the law.
In a statement on Monday, Special Assistant to the President for Investment and Economic Affairs Frederick Go said the enactment of the VAT refund law for non-resident tourists is a direct response to the call of local tourism groups.
“This initiative aligns with global best practices, as many countries already offer such, making it a strategic move for the Philippines to enhance its appeal to international visitors,” he said.
“By encouraging substantial spending from tourists, we aim to drive economic growth and create more opportunities for our people,” he said.
Earlier, Go said the VAT refund for tourists and e-visas were necessary to position the Philippines as Asia’s shopping capital.
Philippine Retailers Association (PRA) president Roberto Claudio said in a Viber message on Monday that the group also sees the signing of the VAT refund scheme for tourists law a welcome development.
The PRA has long advocated for the implementation of a VAT refund system for tourists with the retail industry expected to benefit through improved sales.
“This should make us competitive in the tourism market, considering we are the only Asian country not offering VAT refund for tourists. This will boost tourism arrivals and expenditure in the country,” he said. – With Bella Cariaso, Cecille Suerte Felipe, Jasper Emmanuel Arcalas, Keisha Ta-asan, Louella Desiderio, Mark Ernest Villeza
