VAT refund law for tourists to drive PH economic growth

The Department of Finance (DOF) is optimistic about the country’s economic outlook for 2025, following the recent enactment of two significant laws aimed at driving tourism, local spending, and food security.

On December 9, Department Secretary Ralph G. Recto announced the signing of Republic Act (RA) No. 12079, the Value-Added Tax (VAT) Refund Mechanism for Non-Resident Tourists Act, and RA No. 12078, which amends the Agricultural Tariffication Act.

The newly signed VAT refund law allows foreign tourists to claim VAT refunds on locally purchased goods, bringing the Philippines in line with other countries that have long implemented similar systems. Recto emphasized that the law is a strategic move to encourage foreign tourists to spend more, thus stimulating the domestic economy. “With increased tourism spending, we will have higher revenues, create more jobs, raise incomes, and accelerate economic growth,” Recto stated.

Under the VAT refund law, tourists must personally buy goods from accredited stores, and the purchased items must be taken out of the country within 60 days. Transactions must meet a minimum of PHP 3,000, though this threshold can be adjusted based on the consumer price index. Refunds can be issued either electronically or in cash, and will be sourced from the Special Account in the General Fund.

The DOF will collaborate with international VAT refund operators to ensure the system aligns with global best practices. Recto noted that while the VAT refund law may lead to some revenue losses initially, the increased tourism spending would more than offset these losses, potentially boosting economic output by PHP 2.8 billion to PHP 4.0 billion annually.

In addition to the VAT refund law, RA 12078 amends the Rice Tariffication Law, strengthening efforts to stabilize rice prices and prevent hoarding. The amendments empower the Department of Agriculture to monitor rice trade and storage and to declare a rice food security emergency when necessary. The law also allocates PHP 30 billion annually to the Rice Competitiveness Enhancement Fund (RCEF) to improve rice farmers’ competitiveness.

With these reforms in place, Recto believes the country is positioned for sustained economic growth, driven by both the tourism sector and stronger agricultural policies.