By: Atty. Gregorio B. Austral, CPA
Tourists to enjoy VAT refunds in the Philippines
The Philippines has recently passed Republic Act No. 12079, introducing a VAT refund mechanism for non-resident tourists. This new law aims to boost tourism and make the Philippines a more attractive destination for international travelers.
To be eligible, tourists must be non-resident foreign passport holders. The goods must be purchased from accredited stores and taken out of the Philippines within 60 days of purchase. The minimum purchase value per transaction must be at least P3,000.00, but this threshold will be reviewed every three years.
The Department of Finance will contract reputable VAT refund operators to establish and operate the refund system. Refunds can be provided electronically or in cash.
The VAT refund system will be funded by a special account in the General Fund.
The implementing rules and regulations will be developed by the Secretary of Finance in consultation with various government agencies.
The VAT Refund System has been implemented in many countries around the world, including major economies like the European Union (EU) Member States (e.g., France, Germany, Italy, Spain), United Kingdom, Australia, Japan, South Korea, Singapore, Malaysia, Thailand, among others.
The impact of VAT refund systems on tourism can be significant. These systems encourage tourists to spend more on local goods and services, which can lead to increased revenue for businesses, especially small and medium-sized enterprises (SMEs)3. Additionally, the increased spending can boost the overall economy by creating jobs and promoting local products on a global scale.