VAT refund system for tourists gets House panel nod

The bill, as amended, entitles tourists to a refund of the VAT paid for goods purchased worth at least PHP3,000 per transaction from accredited retailers. (Pexels Photo)

MANILA – The House Committee on Ways and Means on Monday approved a measure creating a mechanism through which non-resident tourists may refund their value-added tax (VAT).

During the hearing, Nueva Ecija Rep. Mikaela Angela Suansing, committee senior vice chairperson, said tourist spending is estimated to increase from PHP10.6 billion to PHP42.3 billion within a year after the bill is enacted into law and implemented.

Suansing said the tourist incentive envisioned in the bill will help stimulate the country’s tourism and trade, making the country more competitive and boosting the profitability of local businesses.

The bill, as amended, entitles tourists to a refund of the VAT paid for goods purchased worth at least PHP3,000 per transaction from accredited retailers.

It defines a tourist as “a foreign passport holder, who is a non-resident individual not engaged in trade or business in the Philippines.”

Committee chair and Albay Rep. Joey Sarte Salceda said the proposal has already been approved in principle by President Ferdinand R. Marcos Jr. when it was brought up by the Private Sector Advisory Council.

He said the measure is long overdue, noting that the Philippines is the only country in Asia that does not have a tourist VAT refund system.

“Save for India and Cambodia, we are the last major Asian country without an operative VAT refund system for tourists. That hurts our competitiveness for tourists with, say, Vietnam and Thailand, which now receive more tourists than we do,” he said.

He expects domestic sales to tourists increasing by 30 percent when the measure is enacted into law.

Citing global studies, he said a VAT refund, increases the propensity to spend, adding that for every PHP1 refunded, the tourist spends an additional PHP1.5.

“That will create an additional 20-80 thousand jobs, and will also improve our gross international reserves,” Salceda said.

The measure also allows the VAT refund system to be administered by a service provider, as is the practice in most jurisdictions.