The white sand beach of Boracay--arguably the crowned jewel of Philippine tourism (Unsplash)

House Speaker Martin Romualdez has recognized the huge economic boost that the newly-signed value-added tax (VAT) refund law for foreign tourists will give to the Philippines.

“This piece of legislation will greatly boost international tourism and the sale of goods by tourist-oriented establishments,” the leader of the 300-plus-strong House of Representatives said in a statement Monday, Dec. 9 following a ceremonial signing in Malacañang. 

The new law is titled, “An Act creating a VAT refund mechanism for non-resident tourists, adding a new section 112-A to the National Internal Revenue Code of 1997, as amended, for the purpose.”

Romualdez said more tourist arrivals and increased tourist purchases of locally-made products due to VAT refunds would translate to more economic activities that would benefit the people.

The VAT rate in the country is 12 percent, based on the gross selling price.

The Lakas-Christian Muslim Democrats (Lakas-CMD) said countries most visited by international tourists like Japan and Singapore offer VAT or tax refunds as an incentive to visitors.

There are large retail establishments in these countries offering refunds on VAT or local sales tax, which make them highly popular among tourists, noted Romualdez. 

“Just ask Filipinos who have visited Japan, and they will tell you that they patronize these megastores not only for the products they sell at lower prices but also for the tax refunds,” he said.

He added that the Philippines could learn from the experience of these countries.

Under the VAT refund law, tourists or non-resident foreign passport holders may apply for a refund if they buy goods from a duly accredited store in person, if the products are taken out of the country within 60 days from the date of purchase, and the goods purchased are worth at least P3,000 per transaction. 

The law authorizes the Department of Finance (DOF) to contract one or more reputable, globally recognized and experienced VAT refund operators to operate this VAT refund system for tourists.

Refunds may be transferred in cash or through the use of electronic methods.

The law mandates the DOF, in consultation with the Department of Trade and Industry (DTI), Department of Transportation (DOTr), Department of Tourism (DOT), National Economic and Development Authority (NEDA), Bureau of Internal Revenue (BIR), and Bureau of Customs (BOC), to issue implementing rules and regulations.

According to NEDA, the VAT refund law is projected to raise P3.3 billion to P5.7 billion in additional revenues from 2024 to 2028, and create 4,400 to 7,100 jobs a year.