While a European vacation is undoubtedly an unforgettable experience, it can also be expensive.
That’s why savvy travelers have different strategies to save money on flights, hotels, and car rentals (hopefully we’ve read some of TPG’s best books). Money saving tip).
One of the most overlooked ways travelers miss to save money is forgetting to apply for a VAT refund.
VAT is also Value added tax. Let’s say, for example, you just went on a shopping spree in Rome or spent gifts at the El Corte Ingles department store near Las Ramblas in Barcelona. You’ve likely paid VAT on your purchases, but the good news is that EU visitors can often get this tax refunded. Think of it as the traveler’s tax credit.
Despite the obvious savings that can come with a VAT refund, the amount of money Americans leave on the table each year in unclaimed refunds is estimated in the billions. Don’t be one of those travelers. Careyes, Mexico with children | Best family vacation ideas in Mexico
Obtaining a VAT refund is worth the time and effort it takes, especially if you are traveling within the European Union.
The rules surrounding VAT refunds have changed somewhat in recent years, so it’s important to read the latest rules (including the UK stopping VAT refunds for international visitors since Brexit). Here’s everything you need to know about getting the maximum VAT refund when traveling in Europe.
What is value-added tax?
VAT and goods and services taxes (GSTs) are common around the world; More than 160 countries have it.
In the European Union, VAT is similar to sales taxes imposed in the United States, but there are also some big differences. One of the biggest: VAT rates are much higher than those you pay in state and local sales taxes in the United States
The standard minimum value-added tax rate in the European Union is 15%—far more than the combined state and local sales tax rates you’ll find anywhere in the United States. Standard VAT rate In the EU it is currently around 21%. All EU countries have standard VAT rates above the 15% threshold; Luxembourg has the lowest rate at 16%, and Hungary has the highest rate at 27%.
“VAT is one of the main income streams for tax authorities in Europe,” said Britta Eriksson, VAT expert and CEO. VAT refund in Euros, a Los Angeles-based company that helps companies manage VAT in their offshore operations. “[VAT] “It represents almost the same as income tax in terms of government revenue.”
Many EU countries offer lower VAT rates on some goods. Sweden, for example, has a standard VAT rate of 25%. However, for some food items, catering services and even hotels, a reduced VAT of 12% is offered.
France reduced the value-added tax on some agricultural products and even some cultural events to 5.5%. In other countries, items such as books, newspapers, bicycle repairs and shoes receive a reduced VAT rate of just 6%.
As you can see, these “Special prices” It varies from country to country, so make sure you do your homework before your trip. The European Union also exempts some goods and services from VAT; Some exemptions include educational services, financial services, and medical care.
What are the refund rules?
Prices in the European Union always include VAT. If you’re visiting an EU country, you’ll generally have to pay for the item, VAT, and everything, and get your money back after the fact.
There are several requirements that must be followed to claim your money back. For example, you must take the new item or items home within three months of purchase. VAT refund is not available for large items such as cars. EU visitors also cannot recover VAT for services such as hotel accommodation and meals.
Some countries require that the value of your purchases exceed a certain amount to be eligible for a VAT refund. As with VAT rates, the minimum purchase amount varies from country to country. Expensive airfare and rising fuel prices: Here’s how to save money while traveling
For example, in France, the minimum amount is now €100.01 (about $107) for the total value of purchases you make on the same day and in the same store. In Belgium, the minimum is 50 euros (about $54); In Spain, there is no minimum purchase amount to claim a VAT refund.
Your goods must be new and still in their packaging when leaving Europe. Goods cannot be unpacked, consumed, or worn. If you want to claim a refund, you must pack up everything you purchased and wait until you get home to open it.
Get your refund
Thousands of European stores do their best to accommodate tourists seeking a refund, usually having signs in the window that says “tax-free” or “VAT-free” shop.
While you are paying for your item, inform the clerk that you are a visitor to the EU and intend to recover VAT. The store will have some paperwork you can fill out. You may also need to show your flight ticket as proof that you will be leaving Europe in the allotted time to claim your VAT refund.
Some stores will refund your VAT, but in most cases, you’ll probably have to take your refund forms and process your refund elsewhere.
Many stores work with external agencies, e.g. Global Blue or Planet process your VAT refund, these agencies usually have facilities in major cities where you can take the completed forms and get your refund.
When purchasing your items, check to see if your merchant partners with these agencies.
On the day of departure, make sure to take your receipts, store-filled refund forms, items you purchased, and all other travel documents with you to the airport so you can submit everything to customs.
If you are touring multiple EU countries during your trip, you will complete this process in the last EU country you visited. This means that if you visit France and Italy before ending your trip in Spain, you will apply for a VAT refund on your purchases in Spain.
Customs may inspect your purchases, so make sure they are available and not in your checked baggage. Also, make sure that the goods are unused and unworn.
If the store or a third-party refund agency has already refunded your money, you will need to mail them this stamped form to prove that you left Europe within the prescribed three-month period. Otherwise, you risk your refund being voided and your credit card being charged the VAT you owe.
If you haven’t already, you can also get your money back at the airport. Large refund agencies have facilities at all major EU airports, and sometimes at currency exchange offices. Simply show them your stamped customs forms and your passport to get your refund, minus fees.
There is no refund of VAT in the UK
Before we share some tips on how to get your VAT refund, we would like to remind everyone that the UK no longer provides VAT-free shopping services to international tourists. In fact, Great Britain is now the only European country that does not offer savings to international visitors.
The VAT retail export scheme was abolished when the UK left the EU in 2021.
Although there is some Optimism about the possibility of returning VAT refunds to Britain In the future – the UK tourism industry is pushing for its return – and this is not an option at the moment.
Although VAT refunds are no longer available in England, Scotland, and Wales, you can still claim a VAT refund if you are visiting Northern Ireland. There are also many exceptions and rules to be aware of; For example, this does not apply to services such as hotel bills. However, if you are planning to visit, you can save some money on your purchases.
Tips to maximize your savings with VAT refunds
Here are some do’s and don’ts to get a VAT refund.
Search the country
Before your trip, Research the VAT rules for the country you are visiting Check standard and reduced VAT rates, as well as minimum purchase points.
As mentioned earlier, prices and rules on what qualifies for a VAT refund can vary depending on where you’re visiting, so make sure you’re aware of this before you get there.
Remember that many countries outside the EU also charge VAT, and their refund policies can differ significantly from what you’ll find in Europe.
Find the store
Stores are not required to provide VAT refund assistance of any kind.
“If you have a store that doesn’t have this program, getting a refund is very complicated,” Erickson warned. 25 Best Hikes in Indonesia: Volcanoes, Waterfalls and Jungles
Keep an eye out for stores displaying “Tax-Free” or “VAT Exempt” signs. Ask the store employees which third-party agencies they cooperate with for refunds. As mentioned above, some retailers in some countries may charge fees to visitors who use Tax-Free Shopping.
Allow extra time at the airport to receive your refund
Expect to wait in line a bit. Plan ahead and give yourself extra time at the airport, as the line can be long.
If you’re short on time after leaving customs, some agencies will let you drop your stamped forms into one of their mailboxes, and they’ll refund your money later.
Consider shipping your purchases home to avoid VAT altogether
If you don’t want to deal with any of these things, Erickson suggests another option.
“You can also get the store to ship [your items] “Directly to you,” she said. “And after that, they won’t charge you VAT.”
But there is a catch.
“You still have to pay for shipping,” Erickson added.
Shipping costs from Europe to anywhere in the US can get very expensive. Therefore, you must weigh the cost of shipping, VAT, and the time and effort it will take to get your money back to determine if it is worth it.
Make sure the refund is worth it
While many VAT countries have minimum purchases for a refund, in others, any purchase a visitor makes is eligible, no matter how small. So, you should ask yourself whether it is worth applying for a VAT refund for that cheap item you bought as a souvenir. Travel Guide to Phi Phi Island in Thailand (Koh Phi Phi Islands)
Minimum
All this talk about models, looking for signs, standing in line, and stamping can take the edge off an impulse buy. However, it can save you a lot of money in the long run.
If you pay attention and allocate your time wisely, you may get enough money through a VAT refund to help pay for your next transatlantic visit.