DOT hails measure providing VAT refund for foreign tourists

MANILA, Philippines — Refunding the value-added tax (VAT) already charged to foreign tourists visiting the Philippines would help improve the country’s economy especially those relying on tourism, the Department of Tourism (DOT) said.

According to earlier reports, the Senate approved on third and final reading Senate Bill 2415 that would “create a VAT refund mechanism for non-resident tourists,” which would be added as a new provision to the National Internal Revenue Code of 1997.

Foreigners visiting the Philippines as tourists should have bought “at least P3,000” worth of local goods “in local, duly accredited stores,” which should be taken out of the country within 60 days from purchase.

In a statement, Tourism Secretary Christina Garcia-Frasco commended the passage of the proposed measure, which she said would encourage more spending for foreign tourists and more income for micro, small and medium enterprises (MSMEs) in the tourism industry.

It was “a crucial milestone in enhancing the country’s appeal as a premier tourism destination, positioning the Philippines competitively among its regional neighbors,” she said.

She added, “The projected increase of 29.8 percent in tourist spending, as estimated by the House committee on ways and means, represents a tremendous opportunity for growth in local businesses, especially MSMEs, and an increase in tourism employment.”

Meanwhile, the Philippine Retailers Association (PRA) and retail giant SM noted that the process of refunds for tourists should be easy and simple to make the system work.

During the 2024 Outstanding Filipino Retailers Awards Night, PRA president Roberto Claudio hailed the progress in the VAT refund mechanism for non-Filipino tourists bill, which has been approved by both the House of Representatives and the Senate and is now on its way to Malacañang for the signing of the President.

“This will put the Philippines in the tourist map,” Claudio said.

He said the Philippines is the only country in Asia not providing VAT refunds to tourists.

“So tourists never came to the Philippines to do their shopping,” he said.

He also said this is the reason why other countries like Thailand, Vietnam and Singapore are getting more tourist arrivals compared to the Philippines.

In the same event, SM Prime Holdings Inc. executive committee chairman Hans Sy said the approval of the bill on the VAT refunds mechanism is seen as a positive development by the company, which is engaged in the operation of malls.

In countries like Japan, he said the VAT refunds are given outright to shoppers as long as they show their passport.

In some countries, he said it is almost impossible for tourists to get the tax refunds because they still have to go to the airport where the lines can be long.

In such cases, the tourist may just decide to forgo the refunds.