The Supreme Court, sitting En Banc, dismissed a petition challenging Republic Act No. 12079, the law creating a VAT refund mechanism for non-resident tourists, and declared the law not unconstitutional.
The case was filed by petitioner John Barry T. Tayam against the Secretary of Finance, the Senate President, and the Speaker of the House of Representatives.
The Case
The Petition for Certiorari and Prohibition assailed the constitutionality of Republic Act No. 12079, titled "An Act Creating a VAT Refund Mechanism for Non-Resident Tourists, Adding a New Section 112-A to the National Internal Revenue Code of 1997, as amended, for the Purpose," for allegedly violating Article VI, Section 28(1) of the Constitution.
On March 6, 2023, House Bill No. 7292 was approved on third reading by the House of Representatives, and was sent to the Senate the following day. On September 23, 2024, the Senate approved on third reading its own version, Senate Bill No. 2415. On September 26, 2024, the House of Representatives adopted Senate Bill No. 2415 as an amendment to House Bill No. 7292.
On December 9, 2024, Republic Act No. 12079 was signed into law. It inserted a new Section 112-A under Title IV, Chapter I of the National Internal Revenue Code, granting a VAT refund for foreign tourists under certain conditions. The law defines a "tourist" as a non-resident foreign passport holder.
On March 24, 2025, the Implementing Rules and Regulations of Republic Act No. 12079 were signed by former Department of Finance Secretary Ralph G. Recto, Bureau of Customs Commissioner Bienvenido Y. Rubio, and Bureau of Internal Revenue Deputy Commissioner Marissa O. Cabreros.
The Issue
Petitioner Tayam sought to nullify Republic Act No. 12079 on the ground that the VAT refund for non-resident foreign tourists allegedly violated the constitutional right to equal protection of the law, as the measure excluded Filipino citizens.
The Ruling
The Court held that the law does not discriminate against Filipino citizens. It ruled that the primary goal of the State to boost tourism can only be realized if certain privileges are granted to foreign tourists.
In its dispositive portion, the Court stated: "ACCORDINGLY, the Petition is DISMISSED. Republic Act No. 12079 is declared NOT UNCONSTITUTIONAL."
By the Numbers
- Republic Act No. 12079 — the law assailed in the petition
- G.R. No. 280898 — the case docket number
- March 6, 2023 — House Bill No. 7292 approved on third reading by the House
- September 23, 2024 — Senate approved Senate Bill No. 2415 on third reading
- September 26, 2024 — House adopted Senate Bill No. 2415 as an amendment
- December 9, 2024 — Republic Act No. 12079 signed into law
- March 24, 2025 — Implementing Rules and Regulations signed
- P3,000.00 — minimum value of goods purchased per transaction to be eligible for refund
- 60 days — period within which goods must be taken out of the Philippines from the date of purchase
- P5.2 billion per year — expected net increase in tourism revenues from implementing the VAT Refund Program
- Three (3) years — interval for review and adjustment of the threshold
The Court's Reasoning
The Court explained that the policy is based on the nature of VAT as a tax on consumption. As a general rule, the VAT system uses the destination principle as a basis for the jurisdictional reach of the tax — goods and services are taxed only in the country where they are consumed. This is why exports are zero-rated under the National Internal Revenue Code, while imports are taxed.
The Court noted that the goods subject of the VAT refund are taken out of the Philippines by the tourist within 60 days from the date of purchase, meaning the goods are meant to be consumed outside the Philippines. If goods are to be consumed fully or partially in the Philippines, the destination principle dictates that they must be taxed here. Section 5 of the IRR outlines the eligible goods, excluding goods in commercial quantity, goods to be consumed fully or partially in the Philippines, goods purchased from e-marketplaces and other digital or online stores, and services such as transportation, accommodation, or other hospitality services.
The Court found no merit in Tayam's argument that foreigners holding long-term visas would be at a disadvantage, explaining they may still avail of the VAT refund for as long as they have no residence in the Philippines and take the goods out of the country within 60 days. It also held that Filipinos living or working abroad who use their Philippine passports cannot be considered foreign tourists in their own country, as their legal tie to the Philippines remains full and intact.
The Court took judicial notice that the concept of a VAT refund for foreign tourists is a well-established international practice, noting that the Philippines is among the last few countries in Asia to adopt such a system, while neighbors such as Indonesia, Malaysia, Singapore, Thailand, Vietnam, China, and Japan have long implemented it.
The Court concluded that a mere difference in treatment, without more, does not violate the equal protection clause, and that granting a VAT refund to foreign tourists was a policy decision based on legitimate state interests.
Source: Supreme Court decision in John Barry T. Tayam v. Hon. Ralph G. Recto, et al., G.R. No. 280898, promulgated April 22, 2026, En Banc.
This report summarizes a public Supreme Court decision and is not legal advice.