MANILA, Philippines — The Department of Finance (DOF) has released the draft implementing rules and regulations (IRR) for the refund of value-added tax (VAT) on local goods purchased by tourists in a bid to promote the Philippines as a shopping destination.
The draft rules were issued as the DOF invited stakeholders to a public consultation next week to clarify concerns and gather suggestions that will help ensure the proper implementation of the refund mechanism.
The draft IRR aims to prescribe the guidelines, procedures and standards for the implementation of a VAT refund system for tourists (VRS) in the Philippines.
Based on the proposed rules, a tourist may get a refund of the VAT paid on locally purchased goods if these are bought from duly accredited stores and are taken out of the Philippines as accompanied baggage within 60 days from the date of purchase.
The refund will 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.
The value of the goods purchased per single transaction should also be equivalent to at least P3,000, covered by a single invoice duly registered with the Bureau of Internal Revenue (BIR).
The draft regulations state that Filipinos with dual citizenship may avail themselves of a VAT refund if they use their foreign passport in entering the Philippines.
To avail themselves of the refund, tourists should present their valid passport and electronic travel system-issued QR code to accredited stores prior to the purchase of eligible goods.
Upon verification, stores will then input a tourist’s passport and purchase transaction details in the VRS and issue a corresponding invoice, indicating that a refund is qualified.
At the airport or seaport, this will be validated, approved and paid by the VRS operator in Philippine currency either in cash or electronically. The tourist will be charged with a service fee for the refund processing.
Further, the VRS operator will classify VAT refund claims as either low or high-risk. If classified as high-risk, the tourist will be required to present the goods purchased for inspection and further validation.
On the other hand, low-risk VAT refund claims will only be subject to random inspection and validation.
The amount necessary for the VAT refund system will be charged against the special account in the General Fund under the Tax Code.
The DOF will also conduct a general review of the IRR as necessary based on new economic conditions, tourism trends, fiscal policies and international standards.
Apart from the DOF and BIR, implementing agencies include the departments of Tourism, Trade and Industry, Transportation, Information and Communications Technology, National Economic and Development Authority and Bureau of Customs.
It was December last year when President Marcos signed Republic Act 12079 that aims to stimulate more spending, promote the Philippines as a premier global shopping destination and put a spotlight on the country’s local products.
BIR estimates showed that forgone revenues from the measure range from P4.5 billion to P6 billion every year.
However, the DOT said the forgone revenues would be more than compensated by tourists’ spending and the jobs to be created.