Evolving Rules on Tax Refunds
By: Atty. Rodel C. Unciano
"For a long time, VAT refund mechanism of this kind was not available in our tax laws until the signing into law of RA 12079. With the effectivity of RA 12079, a non-resident tourist shall now be eligible for refund of VAT on locally purchased goods if the following requisites are present: the goods are purchased in person by the tourist in duly accredited stores, the goods are taken out of the Philippines by the tourist within sixty (60) days from the date of purchase, and the value of goods purchased per transaction is equivalent to at least Three Thousand Pesos (P3,000.00), subject to review and adjustment every three (3) years by the Secretary of Finance."
 Atty. Rodel C. Unciano +632 8403-2001 loc.380 |
One significant addition recently introduced in our tax laws is the Republic Act (RA) No. 12079, which provides Value-added tax (VAT) refund mechanism for non-resident tourists. The law aims to boost tourism and encourage more foreign tourists to travel, shop, and spend more in the Philippines, thereby bolstering economic growth.
For a long time, VAT refund mechanism of this kind was not available in our tax laws until the signing into law of RA 12079. With the effectivity of RA 12079, a non-resident tourist shall now be eligible for refund of VAT on locally purchased goods if the following requisites are present: the goods are purchased in person by the tourist in duly accredited stores, the goods are taken out of the Philippines by the tourist within sixty (60) days from the date of purchase, and the value of goods purchased per transaction is equivalent to at least Three Thousand Pesos (P3,000.00), subject to review and adjustment every three (3) years by the Secretary of Finance.
As defined, tourist refers to a non-resident foreign passport holder who visits the Philippines and whose residence is not within the Philippines. Filipinos with dual citizenship shall be eligible to avail a VAT refund if they use their foreign passport in entering the Philippines and they fall under the definition of “tourist”. Sales to citizens and residents of the Philippines and foreign nationals residing in the country are not eligible for VAT refund.
The VAT refund shall only apply to retail and tangible goods, such as clothing, apparel, electronics, gadgets, jewelry, accessories, souvenirs, food, or non-food consumables, and other goods intended for personal use. Purchases of commercial goods, perishable goods, goods to be consumed fully or partially in the Philippines, goods purchased from e-marketplaces and other digital or online stores, prohibited items, regulated items in commercial quantity, and services, among others, are not qualified for VAT refund.
Under the law, the Department of Finance has been tasked to engage the services of reputable, globally recognized, and experienced VAT Refund System (VRS) operators to provide end-to-end solutions to the government for the establishment and operation of a VAT refund system for tourists. The VRS operator shall be responsible for the design, build, and overall operations of a fully digital end-to-end VAT refund system.
Under the implementing rules and regulations, the tourists who intend to avail a VAT refund shall present their valid passport and E-Travel System-issued QR code to the duly accredited store prior to the purchase of eligible goods. The duly accredited store shall verify the identity and eligibility of the tourist for VAT refund by checking the passport and E-Travel System-issued QR code presented. The duly accredited stores shall issue a corresponding invoice with an indicator that the transaction is qualified for VAT refund to the tourist.
At the airport or seaport, the tourist claiming VAT refund shall present their foreign passport to the VRS operator for validation. After the successful validation of the claim for VAT refund, the same shall be approved and paid by the VRS operator in Philippine currency, either in cash or electronically (e.g., digital wallets, bank transfers, or credit cards). The electronic payment of the VAT refund shall only be made directly to the digital wallet, bank, or credit card account of the tourist claiming such refund.
VAT-registered retail establishments intending to participate in the VRS shall undergo accreditation with the VRS operator. The VRS operator shall provide duly accredited stores with hardware and/or software for processing transactions, training, performance reporting, marketing and promotions support, and other services required to ensure the efficient processing of sales transactions subject to VAT refund.
The VRS operator shall apply for reimbursement of the amount of VAT refunded to tourists with the Bureau of Internal Revenue (BIR), subject to the submission of documentary requirements as may be required by the BIR. The BIR shall verify the documents submitted and shall process the reimbursement of the refund amount, subject to disallowances in case of any discrepancy or deficiency that may be found in the supporting documents.
The tourism industry provides a good source of income and livelihood to many of our citizens in various tourist spots all over the country. Hopefully, true to its objective, RA 12079 will be able to boost tourism in the country and, in its own little ways, help uplift the Philippine economy.
The author is a partner of Du-Baladad and Associates Law Offices (BDB Law), collaborating with Andersen Global in the Philippines.
The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at This email address is being protected from spambots. You need JavaScript enabled to view it. or call 8403-2001 local 380.