Press Release - PRIB: Senate passes measure giving VAT refund to tourists

The Senate on Monday, September 23, 2024, approved on third and final reading the proposed value-added tax (VAT) refund measure for non-resident tourists that would hopefully attract more tourists.

With 20 affirmative votes, one negative vote and no abstention, Senate Bill No. (SBN) 2415 or An Act Creating a Vat Refund Mechanism for Non-Resident Tourists, adding a New Section 112-A to the National Internal Revenue Code of 1997, was approved in the plenary.

Minority Leader Aquilino "Koko" Pimentel III registered his opposition to the measure.

Sen. Win Gatchalian, chairperson of the Committee on Ways and Means and sponsor of the bill, said SBN 2415 aims to provide non-resident tourists with VAT refunds for local purchases worth at least P3,000.

Based on the National Economic and Development Authority (NEDA) assessment, Gatchalian is optimistic that the proposed fiscal reform is projected to generate an amount ranging from P3.3 billion to P5.7 billion per annum from 2024 to 2028.

The proposed scheme is also expected to create additional employment opportunities of 4,400 to 7,100 per annum from 2024 to 2028, he said.

"Moreover, the grant of a VAT refund can encourage purchases from tourists, especially since shopping has emerged as a motivating factor for travel in recent years," he said, adding that shopping constitutes an average of 12 percent of the total expenditures by inbound tourists before the pandemic.

While this figure is notably lower compared to the expenditure items such as accommodation, food and beverage, and transportation services, it is worth noting that, in 2022, the share of shopping increased substantially to 21.9 percent, indicating its potential to drive our economy, moving forward.

Under the bill, a tourist shall be eligible for a VAT refund on locally purchased goods if the goods are purchased in person by the tourist in duly accredited stores; and such goods are taken out along with the tourist within 60 days from the date of purchase.

The threshold of P3,000 may be adjusted by the secretary of the Department of Finance (DOF) upon the recommendation of the Bureau of Internal Revenue (BIR) commissioner, taking into consideration the Consumer