House panel approves bill mandating higher VAT refund for foreign tourists

MANILA, Philippines — A panel of House lawmakers approved a bill on Monday mandating higher tax refunds for foreign tourists in a bid to promote the country's tourism industry.

The Ways and Means Committee of the House of Representatives approved House Bill No. 7143 that proposed raising the threshold of value-added tax refund for foreign tourists to P3,000, from P2,000, on goods they have purchased from accredited retailers. 

As it is, the Philippines is managing the tourism sector’s recovery from the pandemic. The public health crisis shut down the tourism industry in 2020 and 2021 as mobility restrictions prevented tourists from visiting the country.

The national government is targeting 4.8 million international tourists in 2023. The Philippines recorded 2.6 million tourist arrivals last year. 

House lawmakers argued that increasing that amount would put the Philippines on par with other ASEAN countries, which could boost the local tourism sector.

Data provided showed that among some of its neighbors in Southeast Asia, the Philippines stood behind the VAT refund mechanisms implemented by Vietnam (P4,662.06), Malaysia (P3,758.46), and Thailand (P3,321.02).

Revenues from tourism were pegged at P173 billion in 2022.

The bill also proposed that refunds will only be done through businesses registered under the Bureau of Internal Revenue. Goods would be eligible for VAT refunds within 60 days since tge purchase of items, which should cost at least P3,000. 

That amount is still subject to discussion. The proposed threshold could still change as the proposal considered administrative costs and inflationary and economic pressures when adjustments are considered.