2025 has finally rolled in and social media posts about the possible long weekends throughout the year brought about by the declared regular and special non-working holidays are all over the place. Of course, when we speak of long weekends, people tend to see these as possible out-of-town holidays or even long haul flights to other countries. One good way to get ideas and to plan for these holiday vacations, particularly for those overseas, is to watch content from travelers regarding their latest trips, which often showcase their budols or splurges.
One thing that has always captured my attention whenever I watch these vlogs is when the travelers are able to save on their luxury purchases by having the value-added tax (VAT) or sales tax refunded. I see their delight at getting the refund, enabling them to save money to spend on their other expenses during the trip. Also, certain vlog entries have been very helpful in sharing tips on obtaining VAT refunds, highlighting the ease and smoothness of the process, which is a factor they considered in pursuing the VAT refund.
Shopping is a huge part of tourism, not only in other countries, but also here in the Philippines. Indeed, having a portion of the total price paid, such as the VAT, returned to the buyer, can definitely be an incentive for tourists to procure more locally made pasalubongs for their loved ones.
Fortunately, tourists coming to the Philippines are now entitled to a VAT refund for the goods that they purchase, thanks to Republic Act (RA) No. 12079, which was signed into law on Dec. 9 and took effect on Dec. 24.
Under the law, non-resident tourists are eligible for a VAT refund provided: (1) the goods are purchased in person by the tourist in duly accredited stores; (2) such goods are taken out of the Philippines by the tourist within 60 days from the date of purchase; and (3) the value of goods purchased per transaction is at least P3,000.
The VAT can be refunded either electronically or in cash. The VAT refund system is to be operated by one or more reputable, globally recognized, and experienced VAT refund operators providing end-to-end solutions to the government. The Secretary of Finance, in consultation with the other administrative agencies and departments, is tasked with issuing the rules and regulations to faithfully implement the provisions of the law.
The VAT refund for non-resident tourists is definitely a welcome change considering the projected increase in revenue to boost the economy and the growing level of tourists. However, like all changes, there are challenges to be overcome.
From a tourist’s perspective, the weight of the benefits of the refunded VAT over the cost or burden of going through the refund process is one of the main challenges once the refund system is implemented.
Taking into account that the VAT refund threshold amount is just P3,000 per transaction, 12% of that amount may be too small for a non-resident tourist to bother with a cumbersome process. Establishing a refund system that is quite simple and easy to follow would be a key success factor for this government initiative, particularly if the price of the goods to be purchased barely exceeds the P3,000 threshold.
On the other hand, the option to refund the VAT electronically and the engagement of a VAT refund operator for the implementation of this refund system aligns with the BIR’s ongoing efforts to digitalize tax administration. To further modernize the process, the Secretary of Finance in the law’s IRR can also explore the option for an automatic or on-the-spot VAT refund, where tourists can avail the refund by just presenting passports and return tickets. A streamlined process will encourage tourists to purchase more goods in the Philippines by refunding the VAT outright, which will allow them to use the savings to further increase their domestic spending, thereby boosting the economy.
All in all, the idea of a VAT refund for tourists is a gesture of reciprocity for what our own residents have been enjoying in other countries. However, in order to fully realize the potential of the system, its implementation should consider both efficiency and effectiveness, which are part of the considerations of tourists in availing of such opportunities.
In the meantime, all we can do is wait for the implementing rules and regulations, which would hopefully include a more detailed process and procedure that the law has kept broad and open. Fingers crossed that in the next long holiday weekend, we would see more social media content where non-residents share their positive experience with our VAT refund system, enticing other tourists to visit our country.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.
Maryanne Patricia Uno is an assistant manager at the Tax Services department of Isla Lipana & Co. the Philippine member firm of the PwC network.