Traveling abroad offers a delightful opportunity to explore. What it also does, it also presents a chance to take advantage of Value Added Tax (VAT) refunds on eligible purchases!
Many countries around the world offer VAT refunds to non-resident tourists, allowing them to recoup the tax paid on their purchases. Here, we will guide you through the process of claiming VAT refunds while traveling and purchasing goods abroad.
General process:
1. Ask vendors for VAT-Refund-form possibility
2. Purchase your item(s), fill in the form
3. Before check-in: get a stamp from the customs office (show bought items)
3. Before departure: Cash your validated customs form at the official customs office for free or a commercial one for a fee.
The Basics of Claiming VAT Refunds:
Before embarking on your shopping spree, familiarize yourself with the VAT refund regulations of the country you are visiting. Each country has its own rules and eligibility criteria for claiming VAT refunds, so it’s essential to research and understand the specific requirements. The VAT rates can also vary from country to country, affecting the amount you can potentially claim back.
How Tax-refunds are Calculated
Most people assume that because a country charges a 20% VAT rate, they will get 20% back from their purchase amount; but that’s not the right calculation. It is calculated in this format: 100 Euro + 20% = 120 Euro, but 120 Euro – 20% = 96 Euro (and not 100, the price without VAT).
Instead, 120 Euro – 16.66% = 100 Euro (the amount without VAT).
Another example:
Price without VAT = 500
500 x 1,20 = 600 inc VAT
100 (VAT) / 600 x 100 = 16,7% VAT refund, with a 20% VAT rate.
The tax-refund amount will be even lower after administration fees when using an intermediary such as Global Blue or Planet Payment. The refund will be even lower with cash payments, and even lower than that for a cash payment in the currency of choice.
“Shop at Participating Stores”:
When shopping abroad, looking for stores that participate in (commercial) VAT refund schemes can help. These shops typically display signs such as “Tax-Free Shopping” or “Global Blue.” Shopping at these retailers ensures that you can claim a VAT refund on your purchases and it will usually be a much smoother process than doing the process yourself. It’s also a good idea to inquire with the store staff about their VAT refund process before, to avoid any confusion later.
Be aware: Third parties can try to take a cut of your VAT refund. They usually offer a convenient process for a 20-30% fee. You can save this fee by going through the refund process yourself. However, in most countries, this can take a lot more time (months) and effort (emailing retailers for your VAT refund). Not even mentioning currency and transfer charges by banks.
Keep All Your Receipts:
Maintain a systematic record of all your shopping receipts, making sure they are itemized and clearly state the VAT amount paid. The receipts will serve as essential evidence when claiming your VAT refund. For added security, consider taking photos of your receipts and keeping digital copies as backups.
Understand the Minimum Purchase Threshold:
Some countries have a minimum purchase threshold, which means you need to spend a certain amount to be eligible for a VAT refund. Verify the minimum spend requirement beforehand to ensure that your purchases meet the necessary criteria for claiming a refund.
Minimum VAT Thresholds:
| Country | Minimum threshold (inc VAT) |
| Spain | € 00,00 (used to be € 90,16) |
| France | € 100,01 |
| Denmark | 300 Kr |
| United Kingdom | VAT refund is only possible if the seller directly ships the goods overseas. |
| Italy | € 154,94 (per invoice) |
| USA | Individual per state |
| Germany | € 50,00 |
| Netherlands | € 50,00 per invoice |
| Turkey | 120.00 TRY ( € 4,04 euro) |
| Portugal | € 50 excluding vat |
| Slovenia | € 50 |
| Finland | € 40 |
Get a VAT Refund Form:
At the time of purchase, request a VAT refund form from the retailer. This form typically requires your personal information, passport details, and a description of the purchased items. Double-check that the information on the form matches your receipts accurately.
Get the Customs Stamp:
Before departing the country, make sure to get your VAT refund form stamped by customs officials. This is a crucial step, as it verifies that you are taking the purchased goods out of the country and are eligible for a VAT refund. Head to the customs desk at the airport or designated VAT refund offices to get the necessary stamp.
Submit Your VAT Refund Form:
Once you have the customs stamp, proceed to submit your VAT refund form to the designated tax refund office or the airport VAT refund desk. Some countries offer electronic submission options, making the process more convenient. Ensure you submit the form before the specified deadline to avoid any delays or rejections. Intermediaries pay instant or quickly, once forms are stamped.
Await Processing and Receive Your Refund:
VAT refund processing times can vary depending on the country and the method of refund. In some cases, you may receive an immediate cash refund at the airport or the VAT refund office. Alternatively, the money may be refunded to your credit card or bank account within a few weeks. Patience is key during this step, as administrative processing times may differ.
Claiming VAT refunds while traveling and purchasing goods abroad can be a rewarding way to save money and enhance your overall travel experience. By understanding the VAT refund process, keeping organized records, and adhering to the specific regulations of each country, you can maximize your savings and make the most of your international shopping adventures. So, whether you’re exploring bustling markets, upscale boutiques, or unique artisanal shops, don’t forget to explore the possibilities of claiming VAT refunds and making your travel shopping more enjoyable and financially advantageous. Happy shopping and safe travels!