The Philippines is now a value-added tax (VAT)-free tourist destination after Finance Secretary Ralph Recto and other relevant officials signed on Monday the implementing rules and regulations (IRR) for Republic Act No. 12079, or the VAT Refund for Non-Resident Tourists.
Recto, along with Bureau of Customs Commissioner Bienvenido Rubio and Bureau of Internal Revenue (BIR) Deputy Commissioner Marissa Cabreros, signed the IRR on Monday, March 24.
Tourism Secretary Christina Garcia-Frasco and Secretary Frederick D. Go of the Office of the Special Assistant to the President for Investment and Economic Affairs witnessed the signing of the IRR.
RA 12079 aims to boost tourism and encourage more foreign tourists to shop and spend more in the Philippines as a way of bolstering economic growth. President Ferdinand Marcos Jr. signed the Act on Dec 9, 2024.
In a statement, Recto said non-resident tourists or foreign passport holders may apply for a VAT refund for locally purchased goods at accredited stores amounting to at least P3,000.
The IRR also stated that the goods must be physically taken out of the Philippines by the tourist within 60 days from the date of purchase.
Recto said that the VAT refund only applies to retail and tangible goods, such as clothing, apparel, electronics, gadgets, jewelry, accessories, souvenirs, food or non-food consumables and other goods intended for personal use.
“With a multiplier effect of 1.97, every 100 pesos spent by a tourist generates 197 pesos in economic output. Imagine that. Halos doble ang balik sa ekonomiya (It comes back to the economy nearly double),” Recto said.
“And more money spent by foreign tourists means more businesses created, more Filipino workers hired, more jobs provided, higher incomes for our people, and more revenues for the government to collect. That’s the simple formula for growth,” he added.
Recto said two things must happen to fully execute and unlock the law’s full potential: the country must establish a fully functional VAT refund system and a surge in inbound tourism.
“We want more tourists to come – and we want them to stay longer, spend bigger, and transact with convenience,” he said.
“From our end at the Department of Finance, we aim to deliver a VAT refund system that is world-class, modern, and built on the principles of transparency, efficiency, and ease,” Recto said.
The IRR mandates the DOF to engage the services of reputable and internationally recognized end-to-end solutions providers or VAT refund operators.
The refunds may be done electronically or in cash to enhance the ease of doing business.
Recto said he is counting on the tourism department’s initiatives to market the Philippines as the right place to spend their money whenever they visit.
Filipinos with dual citizenship are eligible for VAT refunds if they use their foreign passports to enter the Philippines. They must also fit under the definition of “tourist” in the IRR as non-resident foreign passport holders who visit the Philippines.
Residents of the Philippines and foreign nationals residing in the country such as diplomats, consular officers, expatriates, and VAT-exempt foreign nationals, are not eligible for VAT refunds.
Tourists who intend to avail themselves of VAT refunds must present their valid passports and E-Travel System-issued QR codes to accredited stores before buying eligible goods.
Accredited stores will input the tourist’s passport and purchase transaction details in the VRS (VAT-refund system) and issue the buyer a corresponding invoice that indicates the transaction is qualified for a VAT refund.
If physical inspection of goods is required, the draft IRR states that the tourist must proceed to the Customs Inspection counter to complete the inspection and validation phases before the processing of their refund claims.
After the successful validation of the claim for VAT refund, the same shall be approved and be paid by the VRS operator in Philippine currency either in cash or electronically.
