Getting the VAT Back

How to get the VAT (state taxes) on your souvenir purchases refunded

Look for the "Tax Free Shopping for Tourists" sign in stores and the process of getting the VAT tax refunded will be much simpler and smoother.
Look for the "Tax Free Shopping for Tourists" sign in stores and the process of getting the VAT tax refunded will be much simpler and smoother.

• VAT basics
• VAT rates
VAT minimums
VAT refunds
Resources
OK, first the bad news. Unlike in America, where sales tax is (mostly) a state-by-state phenomenon that gets added on at the cash register, in most countries around the world the sales tax is included in the price tag.

That is nice, in that there's no math to do in your head—the price you see is what you pay—but it's also awful, for two reasons.

One is that the tax rate—universally called VAT (for "Value Added Tax") though each country also has its own acronym—tends to be anywhere from 16% to 25%, with an average around 20% (the full chart of VAT rates is below).

OK, technically some countries have tiered VAT systems in which some items are charged only 5%. However, the lower rates are usually on classes of goods or services you'll either (a) never have a chance to buy—like, say, farm machinery—or, as a tourist, (b) be allowed to get a refund.The other major bummer is that you end up paying this VAT automatically, even though, as a tourist, you are not obligated to pay the VAT.

Now the good news—at least so far as Europe is conerned. Since non-EU residents technically do not owe VAT, a system has been set up to refund these ill-gotten taxes to you.

Now for some more bad news, the refund system doesn't kick in it unless you drop a big chunk of change all at once in one store.

You have to spend a minimum amount to get a refund

The minimum amount you must spend ranges from as low as nothing ($0) in Ireland to €175.01 ($240) in France or 300CHF ($318) in Switzerland.

Here are the VAT rates for Europe (and a few other major destinations) and the minimums you need to spend as of 2011:

VAT rates and refund thresholds

Argentina 21% ARS 70 $18
Austria 20% €75.01 $103
Belgium 21% €125.01 $171
Croatia 23% 501 HRK $93
Cyprus 15% 50 CYP $22
Czech Republic 20% CzK 2000 $113
Denmark 25% 300 DKK $55
Estonia 20% €38 $52
Finland 23% €40 $55
France 19.6% €175.01 $240
Germany 19% €25 $34
Greece 23% €120 $164
Hungary 25% 42,001 HUF $209
Iceland 25.5% 4,000 ISK $34
Ireland 21%* 0 (none!) 0 (none!)
Italy 20% €155 $212
Korea 10% 30,000 KRW $27
Latvia 22% 30.26 LVL $59
Lebanon 10% 150,000 LBP $101
Lithuania 21% 200 LTL $79
Luxembourg 15% €74 $101
Morocco 20% 2,000 MAD $246
Netherlands 19% €50 $69
Norway 25% 315 NOK $55
Poland 23% 200 PLN $71
Portugal 23% €60 $82
Romania 24% 250 RON $81
Singapore 7% SG$100 $78
Slovakia 20% €175 $240
Slovenia 20% €50 $69
Spain 18% €90.15 $124
Sweden 25% 200 SEK $31
Switzerland 8% CHF 300 $318
Turkey 18% 118 TRY $75
U.K. 20% £30 $48

* Ireland going up to 22% in 2013, and 23% in 2014

How to get the VAT refund—at the airport

Getting the VAT refunded involves telling the store clerk you're going to be asking for the VAT back. They'll give you receipts and forms to carry with you—though these days, the "forms" are often just a plastic card (looks a bit like a credit card) that the first place you shop provides. You can then present this card to any other store to add onto it the value of any new purchases (assuming you buy at least the minimum expenditure in each shop).

Note that, if you are traveling in Europe, you redeem all your receipts at once, when you are getting ready to leave the last EU country on your itinerary (in this case, "EU country" means all of Western Europe except Switzerland, Norway, and Iceland; and all of Eastern Europe minus Bulgaria, Romania, and Turkey—the latter three are up for membership).

That means bring all your receipts for every EU country to the airport from which you depart. So if you're flying home from Paris, you can take all your Italian, German, Spanish, and French receipts to the customs agent at Charles de Gaulle airport.

Before you even check in for your flight, you must visit the local Customs office at the airport with the receipts and the items you purchased—this is in case the officer wishes to inspect your purchases (which rarely happens).

The Customs agent will stamp your receipt and give you further directions—usually, after going through check in and security, you head to a private VAT refund desk inside the airport and deal with more paperwork there (or, if you have one of the spiffy new cards, they just swipe that).

In some cases, they give you a refund on the spot (taking a fee of anywhere from 4% to 13% for the service, depending on how much you are getting refunded).

The problem is, while they can sometimes give you a refund in your home currency (or issue a refund credit to the credit card you used), in my experience they almost always give you the refund in the local currency.

So there you are, about to leave the country, and they hand you a stack of euros. You now have all of the 20 minutes before your flight boards in which to try to spend it. (Duty Free shops and other airport impulse-buy stores must adore this system.)

More often, the stamped receipt is sent back to the store and your reimbursement is credited against your credit card or sent to you by check. Either way, this can take forever.

Typical waiting time for a VAT refund is 4–8 months. The longest I've ever waited was 18 months for a few bucks back from some Irish sweaters.

How to avoid the airport hassle or long wait

There are two ways around all this effort. Many shops are now part of the "Tax Free Shopping" network (look for a sticker in the store window).

These shops either:

  1. Issue a check along with your invoice, which—after you have the invoice stamped at customs—you can redeem for cash directly at the Tax Free booth in the airport (usually near customs or the duty-free shop), or you can mail it back to the store in the envelope provided within 60 days for your refund.
  2. In some cases, the store takes care of all the hard work—you fill out the form on the spot at the register and they mail it back for you then reimburse your credit card.

You can also often avoid the VAT by having your purchases shipped directly from the store, but this can get extremely pricey.

Resources to find out more

There is lots of VAT shopping advice at the websites of Global Blue (www.global-blue.com) and Premier Tax Free (www.premiertaxfree.com)—two of the companies that are likely to be running that booth past airport security where you get your refund.

There's also lots of good, straightforward advice (specific to Italy, but applicable to many countries) on the English-language pages of the Italian Customs Bureau site (www.agenziadogane.it).

Note that none of this has to do with Duty Free Stores at the airport or Duty Free shopping. For the scoop on Duty Free, click here.

It also has nothing to do with U.S. Customs and how much you can bring back home without paying a duty. For intel on that issue, click here.



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This article was by Reid Bramblett and last updated in November 2011.
All information was accurate at the time.


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