The Philippines has introduced a new law offering a VAT refund to non-resident tourists on locally purchased goods. The aim is to attract more foreign travelers and position the country as a premier global shopping destination, stimulating the domestic economy and increasing tax collection.
On December 9, 2024, President Ferdinand Marcos Jr. signed into law Republic Act 12079, also known as the Act Creating a Value-Added Tax (VAT) Refund Mechanism for Non-Resident Tourists. This law introduces a new section (112-A) to the National Internal Revenue Code, offering a VAT refund incentive to tourists on locally purchased goods. A 'tourist' is defined as a non-resident foreign passport holder for the purposes of this law.
Marcos stated that the law aims to attract more foreign travelers to the Philippines and establish the country as a premier global shopping destination, allowing it to compete with other tourism markets. Senator Sherwin Gatchalian, the author and sponsor of the measure in the Senate, believes that increased tourist arrivals will create jobs across various tourism-related industries, including hospitality, transportation, travel and entertainment. The law is projected to encourage foreign tourists to spend more in the country, stimulate the domestic economy, and ultimately increase overall tax collection driven by economic growth. Finance Secretary Ralph Recto estimates that increased tourism spending will lead to higher government revenues, the creation of more jobs, increased incomes, and accelerated economic growth. The Internal Revenue commissioner also believes that RA 12079 will significantly boost tourism spending, driving economic growth in the sector and ultimately increasing tax collections in the long run. The law is anticipated to result in a 30-percent increase in tourist spending, benefiting both large-scale industries and micro, small and medium enterprises. Foregone revenues are expected to be easily offset by increased tourism spending that will be driven by the VAT refund. Finance department data indicates that savings from the VAT refunds, when fully channeled into additional tourism spending, could boost economic output by P2.8-4 billion annually
VAT Refund Tourism Economy Philippines Tax Collection
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