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DOF vows to exempt tourists from VAT

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By Chino S. Leyco

The Department of Finance (DOF) said yesterday that it is supporting the proposal allowing foreign nationals visiting the Philippines to enjoy tax-free shopping during their stay in the country.

 Finance Secretary Carlos G. Dominguez III (Bloomberg photo)

Finance Secretary Carlos G. Dominguez III (Bloomberg photo)

 

However, Finance Secretary Carlos G. Dominguez III said that the government cannot implement the value-added tax (VAT) refund for tourists unless the Philippines has its electronic receipts or invoices system in place.

“Yes we will, we don’t have the system at the moment but we are certainly going to do it. And it should be in place some time in two years,” Dominguez said in a forum when asked if the Duterte administration plans to give VAT exemptions to foreign visitors.

As early as now, Dominguez said the government plans to outsource the VAT refund system.
“But our problem at the moment is we don’t have an electronic invoicing system, which we are currently working on. We have gotten a grant from the Korean government to study an e-invoicing system, and our plan is to put this in place by 2020,” the finance chief said.

“We have a lot of space to do that. We really targeted Koreans because they have a very efficient system, which they have developed over at least five years,” he added.

Last March, Dominguez said that the government will pass a measure that allows tourists to get VAT refunds on goods they bought in the Philippines within President Rodrigo R. Duterte’s term.

“It’s the right thing to do. We are giving them what is their due, I don’t know if it will entice more tourists, but we have to give them what is their due. It’s really the international practice to do it, giving what is due to them,” Dominguez had said.

Once passed into law, a tourist, upon leaving the Philippines, is entitled to a refund of the 12 percent VAT paid when purchasing goods within a certain period.

Dominguez also said the government was not inclined to put a ceiling on the value of goods that tourists can reclaim a VAT refund.

“There should be no limit. But tourists usually do not buy expensive things [in the Philippines],” the finance chief believes.

Asked when the government plans to pass the law on VAT refunds, Dominguez said “before the end of the administration,” adding that the practice is also normal among the Association of Southeast Asian Nations (ASEAN).

The government may tap a third-party service provider that will handle tourists VAT refunds at international airports and retail centers across the country, Dominguez said.

Meanwhile, Finance Undersecretary Karl Kendrick T. Chua said that until the VAT refund scheme for tourists is not passed into law, all goods and services consumed within the Philippines are subject to VAT.

Many European countries, as well as Singapore, Japan and South Korea, already offer tax free shopping for tourists. Under their present system, when purchases reach a certain amount, tourists can claim a VAT refund before they leave the country.

Earlier, the Department of Tourism (DOT) said that the Duterte administration was eyeing 12 million tourism arrivals annually by 2022.

For 2018, the government is projecting 7.4 million international tourist arrivals.

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