President Marcos Jr. on Monday signed into a law a measure which the government hopes will position the Philippines as a top shopping destination for tourists.
Republic Act (RA) 12079 provides for a value-added tax (VAT) refund for non-resident tourists for purchases worth at least P3,000 per transaction. Refunds are applicable to goods bought in-person at accredited stores, provided these items are taken out of the country within 60 days of purchase.
Marcos said the refund scheme is projected to increase tourism spending by 29.8 percent as it will stimulate higher spending among tourists.
Data from the Department of Finance (DOF) showed savings from the refund fully channeled into additional tourism spending may boost economic output by P2.8 billion to P4 billion annually.
Marcos said the measure will promote the Philippines’ unique craftsmanship of indigenous products in communities near local tourist destinations. significantly benefitting micro, small and medium enterprises.
“It is no secret shopping has become an essential part of the travel experience, and we are poised to capitalize on that momentum… we are introducing the VAT refund program for non-resident tourists—designed not only to stimulate more spending but to promote the Philippines as a premier global shopping destination,” the President said.
In 2023, tourism contributed 8.6 percent to the gross domestic product with shopping as the second largest expenditure for inbound tourists, Marcos added.
Last year, inbound tourism expenditure on shopping reached P137.4 billion.
The measure aligns with the Department of Tourism’s (DOT) National Tourism Development Plan 2023–2028, which includes infrastructure improvements and digital innovations to enhance visitor experience.
The law mandates the Department of Finance (DOF), in consultation with other agencies, to draft implementing regulations within 90 days.
The President, during the signing, had likewise directed the DOF and the Bureau of Internal Revenue (BIR) draft the implementing rules and regulations to make the VAT refund process “simple, accessible, and culturally inclusive.”
On a DOF projection that the VAT refunds to tourists may reach P2.9 billion to P4.1 billion annually, DOT Secretary Christina Frasco said the projected loss can be offset by the potential increase in tourist spending and a boost in inbound tourism.
Frasco did not say how many tourists are projected to be generated as a result of the new law but said “the pros so far outweigh the cons.”
The DOF said the calculated foregone revenues of the law can be easily offset by the economic impact of bolstered tourism spending induced by the refund, the DOF said.
The DOF is mandated by law to engage the services of reputable and internationally recognized VAT refund operators to provide end-to-end solutions to the government to establish and operate a VAT refund system.
Secretary Frederick Go of the Office of the Special Assistant to the President for Investment and Economic Affairs said the enactment of the VAT refund law for non-resident tourists is a direct response to the clamor from local tourism groups.
Go said the scheme aligns with global best practices, as many countries already offer such.
DOF Secretary Ralph Recto concurred saying “it is high time that the Philippines catches up with countries around the world that have long implemented a standard VAT refund system.”
BIR chief Romeo Lumagui Jr., in a separate statement, expressed the full support for the passage of the said measure.
“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,” Lumagui said. – Angela Celis and Irma Isip
