Tax-Free Shopping in Europe: Claim Your VAT Refund
If you have ever visited Europe and done any shopping, you’ve probably noticed that there is no sales tax added at the register like in the U.S. This does not mean, however, that you are not paying any sales tax. The prices you see displayed on an item’s price tag already include this tax, called the value-added tax (VAT), which is conceptually equivalent to the sales tax we pay in the U.S. on retail goods. However, the VAT ranges from 8% to 27%, much higher than average sales tax percentages in the U.S.
Here is the exciting part for travelers: if you are a visitor to the European Union (EU) and a few other non-EU countries, you are likely eligible to buy goods free of VAT. This means that you can obtain a VAT refund for a good portion of your purchases, depending on what you buy. Note that you cannot buy VAT-free goods directly from a retailer even if you have a proof that you are a visitor, you can only obtain a refund after you have initially paid the retailer an item’s full price.
Countries where a VAT refund is available
VAT refunds are available to visitors of the following European countries: Austria, Belgium, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Lichtenstein, Lithuania, Luxemburg, Holland, Norway, Poland, Portugal, Slovenia, Slovakia, Spain, Sweden, Switzerland, Turkey, and the UK.
While most known for the EU, the VAT refund is also available for tourists in a few other countries such as Argentina, Japan, Singapore, Morocco and Uruguay.
VAT Refund Requirements
The complete rules are lengthy and complicated, but here are some general VAT refund eligibility guidelines that should be helpful for most tourists:
- You must be a visitor to the EU, which is defined as “a person who permanently or habitually lives in a country outside of the EU” and provide proof of this status (for example, your passport showing the address of your permanent residency).
- The goods you have purchased must leave the EU with you when you do. Therefore, they cannot be consumed or used while you are in the EU.
- In order to obtain a VAT refund, you must shop at the stores, which provide this service. Many do, especially larger stores, and proudly display “tax free” or “VAT free” signs for their customers.
- You have to meet a minimum purchase threshold (set to avoid the administrative burdens of small-value purchases), which is presently 175 Euros for the EU. However, individual EU countries may set lower thresholds. For example, during our family’s most recent trip to Spain, this amount was 91 Euros (roughly $100 at the time of this article’s publication). These minimum thresholds apply to the total amount of goods bought in a single shop during one shopping trip.
- You can buy VAT-free goods even if you plan on visiting other EU countries before you return home as long as you leave the EU with the goods within three months after the initial purchase. The important item to remember is that you must have your VAT-free forms stamped by a customs officer at your final point of exit from the EU, which may not be necessarily the same country where you bought the goods.
- Services (i.e. restaurant bills or hotel stays), even though they are taxed, are not eligible for VAT refunds.
How much of a VAT refund can you expect?
The VAT varies by class of goods and from country to country. I found this helpful calculator on the webpages of Global Blue, one of the main companies that facilitate VAT refunds for tourists. Keep in mind that your VAT refund amount will be reduced by the service fee you have to pay to companies that process your refund such as Global Blue.
Steps to get your VAT refund
Many tourists feel that the hassle of obtaining their VAT refund is not worth it. I assure you it is not as hard as it may seem. Simply follow these steps:
1. If you find yourself in store with a tax-free or VAT-free shopping signs, great. In the event you have not noticed any signage, ask a sales associate whether they provide VAT-free shopping.
2. Ask about the required minimum spend to make your purchases eligible for a VAT refund.
3. At check out, ask for a tax-free form along with your receipt. You will need to show proof that you are a visitor (your passport or residency card). The store will need your name, address and passport number to fill out the form. Tip: Take a picture of the photo page in your passport with your smartphone if you prefer to leave your actual passport in the hotel safe instead of carrying it around with you. It worked great for us.
4. Make sure you understand how you will obtain your refund. In most cases, the shop uses a third party to process the refunds on its behalf (such as Global Blue mentioned above). In some cases, the shop itself will refund you (see #7 below).
5. When your vacation is over and you are ready to leave the EU, you must show the tax-free forms along with your passport, boarding pass, the original receipts and the goods you purchased to a customs officer at the last EU country from which you depart. Upon inspection of your documents and the corresponding goods, they will stamp your tax-free forms as proof of export. This is very important as no stamp on the forms means no refund for you!
6. It’s now time to collect your refund (minus the service fee). You can get it in cash immediately at special offices located at most EU airports or you may have to send your stamped tax-free forms to the address printed on them in order to obtain your refund. In this case, the VAT is usually refunded to your credit card.
7. Note that in some cases, a store might offer to issue you a refund immediately, based on documents proving your “visitor” status (your passport), even before you have your documents stamped at the airport. This means they basically trust you that you will export the goods and are giving you the convenience of having your cash back immediately. If this is the case, you are still required to submit the documents to them, but you will do this by mailing them after the customs inspection at the airport (same process as #5 above) using the envelope you will receive with your tax-free forms and specially marked mailboxes at the airport. You should be aware that the store will take your credit card number as a form of guarantee that you will indeed do so. If they do not receive your stamped VAT-free form within a certain time period (we were told two weeks in one of the stores which offered this service in Barcelona), your credit card will be “charged” the amount of the refund you received, effectively cancelling your VAT refund. You can always decline this option and choose to obtain your refund the same way as in the process I just described in #6 above if you prefer.
A few useful tips, speaking from experience:
Obtaining a VAT refund is not hard, but it can be tricky even if you have done it before. Here are a few tips that might help you avoid the stress or potential disappointment of your refund being declined:
1. GET TO THE AIRPORT EXTRA EARLY
Make sure to give yourself extra time at the airport to get your purchases examined and your VAT refund forms stamped by customs officials. Allow between 30-45 minutes of extra time. While the actual process does not take long, finding the customs office can sometimes take a bit of time, especially if it is located in a different part of the airport. European airports vary in terms of how easy they are to find the customs office, but most international airports now have customs offices for VAT-free verification conveniently located near international departures to minimize the need to run around the terminal in a frenzied search.
2. THINK CARRY ON
If you can, pack the purchases for which you plan to claim your VAT refund in your carry-on luggage. If this is not an option and the goods only fit in your checked luggage, make sure NOT to check in first as you will need to show the goods to customs officers. After you get your forms stamped, you can then proceed to check in.
3. KEEP ORIGINAL PACKAGING
Remember that the goods must be in the original package, with any tags still attached and not used. For example, if you purchased a lovely pair of shoes in Italy, you will have to wait to wear them until after you have left the country and you must also leave them in the shoe box, if they came with one. You can jettison the box after the customs officer examines your purchases if space is at a premium.
4. KNOW YOUR OPTIONS
If you are claiming an immediate refund at the airport (such as through a Global Blue office), know that you generally have three different options for obtaining your refund money. You can: (1) Elect to have it refunded to a credit card, a great option if you don’t want to be stuck with extra Euros at the end of your trip; (2) Get it in local currency if you prefer to collect cash (Euros in most cases, but also others, depending on the country you are departing from, such as British pounds or Swiss Francs); or (3) Collect cash in another currency that might be available (such as dollars).
However, be aware that if you select this last choice, you will be charged a very steep conversion fee (a big money maker for VAT refund payment processors) in addition to the fairly hefty service fee you are already paying. I strongly recommend NOT electing this option.
I hope I did not scare you away with all the requirements and steps. It really is quite simple once you get a hang of it and the amount of your refund will put a big smile on your face or help you justify that fifth pair of shoes, or in my case, espadrilles, you bought on vacation.
Happy travels (and shopping)!
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