VAT 101: How to Save on Shopping when You’re Traveling

Hey, Big Shopper! Did you know that a 15 minutes stop at the airport before departure out of the EU could save you 20 percent from all of everything you bought in Europe? 

Nope, we are not talking about Geico car insurance. We are talking about VAT tax refunds! 

VAT stands for Value Added Tax. This is similar to a sales tax you see in the US. However, unlike sales tax, the amount of VAT is already pre-added in the price of all the goods you see. So, the prices are final but between 13 and 20 percent of that price is actually a tax. 

If you are a foreigner visiting the EU, you can actually get all of that VAT refunded back to you when departing from Europe.

Here are a few things you need to know, but they’re not that complicated:

1. When purchasing items you are planning to consume in Europe, be sure to request a special receipt for tax-free.
2. You will need to present the items upon departure to prove that you are exporting them out of the EU. So, try to save the products’ original packaging as much as you can and keep items inside if you can. In many cases, you will have the opportunity to repackage your items before checking in. 
3. It is important for you to go to Customs before you check your bags with any items so you can get your receipts stamped. Once stamped, you will be able to go to the bank or to one of the tax-free services to obtain your refund. You can even do it by mail. You have up to 3 years to request your refund.
4. Allow extra airport time for your refunds. Other travelers are also seeking VAT refunds, so give yourself extra time before your departure. This is so you will not risk missing your flight because of long lines at Customs and at refund agencies. If you still lack time after leaving Customs, some refund agencies will let you leave your stamped forms in one of their mailboxes and they’ll issue your refund later. 

Most European countries let you recover VAT when you export an item. However, you must prove that the products actually left the taxing authority in the European country you visited before collecting your refund. Usually, this also means you must leave the EU and not just cross an internal EU border. If you leave by plane, you have to present the goods after passing through the Customs formalities. 

To qualify for a refund, your items must be new and unused. For example, if you buy some high-fashion accessories in Paris, you shouldn’t use them until you leave the EU. 

Other Places that Offer Tax Refunds to Tourists on Departure 

A lot of destinations offer tax refunds to tourists upon their departure. However, you must keep in mind that rules do apply and vary depending on the country. 

Below is a list of some other countries that offer tax refunds upon tourists’ departure: 

Australia 

Australia’s Tax Refund Scheme (TRS) lets you refund on goods, services, and wine taxes that you pay on purchases that you take out of the country. You must have your tax invoice ready and your purchase must total $300 from any single business and be made at least 60 days before your departure. You may claim your refund by visiting any TRS facility in any international airport or cruise liner terminal. 

London

Tourists in London can claim a VAT refund on purchases from several British retailers. To be eligible for the claim, you must buy items from any shop that displays the Tax-Free shopping sign. Then, upon purchasing your goods, you will be given a tax refund form by the retailer. Make sure you don't lose this form and your receipt. Once you arrive at the airport, present these papers to a Travelex counter or the Customs desk to receive your refund. 

Spain 

You can enjoy tax-free shopping in Spain amounting to savings of 21% off the price of any items purchased where the bill exceeds €90.15. Make sure you look for shops that offer tax-free shopping and similar to London, you will need to obtain a form and your receipt. Once you arrive at the airport for your departure, you must present these documents to Customs or at Travelex. This can be done at both Barcelona and Madrid airports. 

Singapore 

When you’re leaving Singapore, you are eligible for a GST refund via Singapore’s Tourist Refund Scheme. However, you must spend at least SGD 100, including GST. Then, take your receipts to any of the 3 refund agencies in the country: Global Blue, Premier Tax-Free, and Fintrax Payments (Asia) Pte Ltd or Global Tax-Free Pte Ltd. You may also opt to sign up for the electronic tourist refund scheme because that process is quicker than filling out paper refund forms. 

Mexico 

In Mexico, the tourist tax refund is only available to international tourists who buy at stores participating in the program. Also, you must only leave the country either by plane or a cruise liner. To be eligible, you will need to spend at least 1,000 pesos on Mexican goods and each receipt must be worth at least 1,200 pesos or the total of receipts from a single business must be at least that amount. To ensure a store is participating in the program, look for the MONEYBACK logo and once you’re at the airport, look for a MONEYBACK kiosk or office. Your refund will be about 8.9% of the number of purchases claimed. 

Hong Kong and Dubai are tax-free destinations so no tax refund is applicable. Meanwhile, the US does charge a sales tax but does not have a refund scheme for visitors. Terms and conditions change regularly so make sure to check the official websites of the countries you’re traveling to prior to going there. 

Beware of Some Pitfalls… 

The paperwork and the Customs stamps are critical to the process of claiming a VAT or tax refund. The thing is, you can sometimes miss out on the chance to comply. 

One way to miss out is to purchase goods from a supplier who doesn’t do the paperwork. Independent artists, street merchants, and many other sellers don’t participate in the program and don’t provide paperwork. 

You may also miss getting your paperwork done if you cross an unattended border. For example, when you drive a rented car or take a train or bus through a lightly used border crossing. If you fly home from Geneva but return a rented car on the French side of the Geneva International Airport, you’ll see that the Customs kiosks in the corridor between the French and Swiss lobbies of the terminal buildings are unattended by either country. 

Many countries that offer VAT or tax refunds have workarounds for these problems. So, in case you encounter a problem in claiming your refund, check their agency websites for details. 

Happy shopping!!!