Manila: The Supreme Court (SC) has ruled that a law to refund value-added tax (VAT) for non-resident foreign tourists is "not unconstitutional". In a 39-page decision penned by Associate Justice Amy Lazaro-Javier, the high court declared that Republic Act (RA) 12079, which grants VAT refunds to foreign tourists, was established based on legitimate state interests, such as the need to remain competitive as a global tourist destination.

According to Philippines News Agency, the court emphasized that the concept of VAT refund for foreign tourists is a well-established international practice. The ruling, published on the SC website on Monday, noted that the Philippines is among the last few countries in Asia to adopt such a system. The decision came in response to a petition by Barry Tayam, who questioned RA 12079 for allegedly violating constitutional rights by excluding Filipino residents from eligibility for VAT refunds.

Under RA 12079, tourists are eligible for a VAT refund on locally purchased goods from accredited stores, valued at a minimum of PHP3,000 per transaction. These goods must be taken out of the Philippines within 60 days of purchase. Filipinos with dual citizenship can avail of the VAT refund if they use their foreign passport when entering and exiting the Philippines, provided they meet the definition of a tourist as a non-resident foreign passport holder visiting the country.

The ruling also clarified that sales to citizens and residents, as well as to foreign nationals residing in the country-including diplomats, consular officers, and expatriates-are not eligible for the tax refund. The SC reiterated that VAT refund programs for foreign tourists are commonly practiced worldwide.