The Philippines Senate has approved Senate Bill No. 2415 or  An Act Creating a Vat Refund Mechanism for Non-Resident Tourists, on 23 September 2024, which permits nonresident tourists to apply for refunds on value-added tax (VAT).

The Senate hopes that this Bill will attract more tourists in the country. Based on the National Economic and Development Authority (NEDA) assessment, the proposed fiscal reform is projected to generate an amount ranging from PHP 3.3 billion to PHP 5.7 billion per annum from 2024 to 2028. In addition, the proposed scheme is also expected to create additional employment opportunities of 4,400 to 7,100 per annum from 2024 to 2028.

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%, indicating its potential to drive the economy 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, such goods are taken out along with the tourist within 60 days from the date of purchase.

The threshold of PHP 3,000 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 Price Index (CPI) as published by the Philippine Statistics Authority (PSA).

The DOF shall engage the services of one or more reputable and internationally recognised VAT refund operators that shall provide end-to-end solutions to the government for the establishment and operation of a VAT refund system for tourists, the bill stated.