The Philippines is now value-added tax (VAT) -free for foreign tourists with the recent signing of the implementing rules and regulations (IRR) for Republic Act No. 12079, or the VAT Refund for Non-Resident Tourists.

RA 12079 aims to boost tourism and encourage more foreign tourists to shop and spend more in the Philippines, bolstering economic growth.

The IRR was signed by Finance Secretary Ralph Recto, along with Customs Commissioner Bienvenido Rubio, and Bureau of Internal Revenue (BIR) Deputy Commissioner Marissa Cabreros, on March 24.

It was witnessed by Tourism Secretary Christina Garcia-Frasco and Office of the Special Assistant to the President for Investment and Economic Affairs Secretary Frederick Go.

Under the IRR, non-resident tourists or foreign passport holders may apply for a VAT refund for locally purchased goods from accredited stores that are equivalent to at least P 3,000.

The goods must be physically taken out of the Philippines by the tourist as accompanied baggage within 60 days from the date of purchase.

The VAT refund only applies 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.

Recto underscored that the Philippines is poised to reap almost double the economic returns as it rolls out the law.

“With a multiplier effect of 1.97, every 100 pesos spent by a tourist generates 197 pesos in economic output. Imagine that. Halos doble ang balik sa ekonomiya,” Recto said in his speech at the ceremonial signing of the IRR.

“And more money spent by foreign tourists means more businesses created, more Filipino workers hired, more jobs provided, higher incomes for our people, and more revenues for the government to collect. That’s the simple formula for growth,” he added.

Recto stressed that effective execution is key to unlocking the law’s full potential, saying two things must happen: the country must establish a fully functional VAT refund system and a surge in inbound tourism.

“We want more tourists to come ? and we want them to stay longer, spend bigger, and transact with convenience,” he said.

Recto vowed to ensure that the VAT refund process is simple, accessible, and culturally inclusive so that communities, businesses, and tourists will be able to maximize the law’s benefits to the fullest extent.

“From our end at the Department of Finance, we aim to deliver a VAT refund system that is world-class, modern, and built on the principles of transparency, efficiency, and ease,” he said.

The IRR mandates the DOF to engage the services of reputable and internationally recognized VAT refund operators to provide end-to-end solutions to the government. Such refunds may be made electronically or in cash to enhance the ease of doing business. DOF Information Management Service