Villafuerte seeks speedy Gov’t OK of VAT refund system for non-resident visitors
To boost tourism spending
CAMARINES Sur Rep. LRay Villafuerte is calling on the Departments of Finance (DOF) and of Tourism (DOT) along with the Bureau of Internal Revenue (BIR) and other concerned agencies to “go full tilt” on crafting a Value Added Tax (VAT) refund system for the local purchases of non-resident tourists to bump up visitor arrivals to pre-Covid levels or even higher and dramatically boost tourism revenue.
Although the new law-provided tax-free shopping privilege for non-resident foreign passport holders will translate into revenue losses, Villafuerte said that such will be more than offset by an estimated jump in earnings from this sector from the government’s projection of an increase in inbound tourists and their consequent bigger local shopping expenses.
By replicating the practice of tax-free visitor purchases in such tourist-friendly economies as Japan and Singapore, the Philippines hopes to sharpen its competitiveness as a potential global shopping mecca, Villafuerte, National Unity Party (NUP) president, said.
“This is why I am hoping that the DOF, DOT, BIR and other concerned agencies can go full tilt on crafting the VAT refund system for the local purchases of non-resident tourists, as provided for in RA (Republic Act No.) 12079 that President Marcos signed last week at Malacañan Palace,” said the former governor.
Villafuerte said, “The heads of these government offices should lose no time in crafting a simple and seamless VAT refund system at the onset of 2025 so the government can implement this tourist-friendly initiative right away.”
Following consultations with the concerned agencies and other stakeholders, the DOF secretary shall release the implementing rules and regulations (IRR) of RA 12079 within 90 days of this new law’s effectivity.
The other stakeholders that are to be consulted by the DOF in the crafting of the VAT Refund System are the DOT, BIR, Departments of Trade and Industry (DTI) and of Transportation (DOTr), National Economic and Development Authority (NEDA) and the Bureau of Customs (BOC).
BIR Commissioner Romeo Lumagui Jr. said before the weekend that the bureau will draw up with the DOF and then release the IRR in the first quarter of next year.
RA 12079 grants this tax-free privilege by amending the National Internal Revenue Code (NIRC) of 1997 to add Section 112-A on establishing this VAT refund system for non-resident foreign passport holders..
Under this law, the DOF shall partner with one or more “reputable, globally recognized and experienced” VAT refund operator or operators to provide end-to-end solutions for the establishment and operation of this incentive for tourist shoppers.
President Marcos said he signed RA 12079 to attract more non-resident tourists to the country by giving these visitors a tax-free privilege on their locally purchased goods.
Villafuerte said that as pointed out by President Marcos during the RA 12079-signing ceremony at the Palace, apart from encouraging higher spending among non-resident tourists, this VAT-refund incentive will also “promote the Philippines’ unique craftsmanship of indigenous products in communities near local tourist destinations.”
The President said the domestic tourism sector had an “instrumental role” in the Philippines’ post-Covid economic recovery in 2023 in contributing an impressive 8.6% to the gross domestic product (GDP), with shopping posting the second largest expenditure of inbound tourists.
On Villafuerte’s watch as three-term governor, CamSur emerged as the country’s No. 1 tourism destination in 2010, besting Metro Manila and Cebu, according to the DOT.
As governor, Villafuerte had aggressively marketed CamSur as a must-see place for ecotourism anchored on the white and pink sand beaches of its Caramoan Islands, as well as a hub for extreme sports with its CamSur Watersports Complex (CWC) in Pili that is considered the world’s best wakeboarding park.
Under RA 12079, Villafuerte explained that non-resident tourists can claim a VAT refund on their purchases with single transactions amounting to at least P3,000 in duly accredited stores, so long as these goods are taken out of the Philippines within 60 days of purchase.
The DOF has projected the potential revenue loss from VAT refunds of non-resident tourists to reach P2.9 billion to P4.1 billion yearly, but Villafuerte said that such estimated foregone taxes are expected to be offset by bigger earnings from higher tourist spending.
President Marcos himself saw a 30% increase in tourist spending and expected an economic impact from this activity on both large-scale industries and micro, small and medium enterprises (MSMEs), Villafuerte said.
Villafuerte said that Speaker Martin Romualdez, citing National Economic and Development Authority (NEDA) data, projected this VAT refund system to raise P3.3 billion to P5.7 billion in extra revenue over the 2024-2028 period and to create some 4,000 to 7,000 jobs annually.
DOT Secretary Christina Garcia-Frasco expected tourist shopping to rise by almost 30% with the VAT refund system, as this tax privilege enhances, she said, the overall visitor experience while at the same propping up the Philippines’ position as one of Asia’s competitive tourist destinations.
According to the DOT, tourism-related shopping amounted to P137.4 billion in 2023.
