Foreign tourists in PH now entitled to VAT refund

MANILA, Philippines — The government expects more foreign tourists coming to the country to splurge after it finally approved the implementing rules and regulations (IRR) for the law entitling them to a value-added tax (VAT) refund.

Finance Secretary Ralph Recto said on Monday that Republic Act No. 12079, or the VAT Refund for Non-Resident Tourist, which President Marcos signed late last year, could generate almost double in economic returns for the country.

The law aims to attract more visitors to the Philippines but it was only on Monday when its IRR was signed.

“With a multiplier effect of 1.97, every P100 spent by a tourist generates P197 in economic output,” Recto said in a statement. “Imagine that. The return on the economy is almost double.”

Under the IRR, nonresident tourists or foreign passport holders may apply for a VAT refund for locally purchased goods from accredited stores that are equivalent to at least P3,000.

READ: Retail group backs new VAT refund rules

The goods must be physically taken out of the Philippines by the tourist as accompanied baggage within 60 days from the date of purchase.

Selected items only

The VAT refund only applies to retail and tangible goods such as clothing, apparel, electronics, gadgets, jewelry, accessories, souvenirs, food or nonfood consumables, and other goods intended for personal use.

But for the new policy to work, Recto acknowledged that two things must happen: the country must establish a fully functional VAT refund system while attracting more inbound tourism.

That said, the IRR mandates the Department of Finance to hire VAT refund operators to provide end-to-end solutions to the government. This is to allow the reimbursements to be made electronically or in cash to enhance the ease of doing business.

“We want more tourists to come—and we want them to stay longer, spend bigger, and transact with convenience,” Recto said.

For this year, the Bangko Sentral ng Pilipinas has projected tourism receipts to grow by 20 percent to $12.6 billion.