If you are a visitor and normally reside outside of the European Union, you may be entitled to a VAT refund.
Each year, travelers leave millions of dollars behind in unclaimed refunds, either because they are unaware of it - similar to their right to flight compensation, or simply because they find it too difficult to deal with.
A shame, when items you purchase can include up to 25% of VAT (yes, rates are usually higher than sales taxes in the US). Know more about VAT refunds and you’ve got yourself a great way to save money on shopping in Europe.
Here are a few key points to keep in mind.
If you've had a delayed or cancelled flight, you could also be missing out on $660 in compensation. Check out if you're eigible in less than 3 minutes:
What is VAT?
The value-added tax (VAT) along with the goods and services tax (GST) is a consumption tax, which means it is paid by the private consumer. It is not a revenue tax.
When you travel to Europe and purchase goods and services, the price you pay generally includes this tax on the added value that is provided at each step of the supply chain, from production to sale.
While over 160 countries use a value-added tax, it is most common in the European Union. It can be labelled VAT, TVA, IVA, moms, MwST, and a few others depending on each country.
How much is the VAT in Europe?
In the European Union, the VAT rate generally ranges from 5 to 25%, depending on the country. Some of them apply different rates of VAT according to the type of product or service, generally categorized as “standard”, “reduced”, and “super-reduced”.
If you're travelling to France, for example, some products include a 20% VAT while it amounts to 5.5 or 10% on others. It can go as low as 2.1% for super reduced VAT.
Check out the VAT rates of the different European countries here.
Keep in mind that what you see on the price tag is what you pay: the value-added tax is systematically included in the price. There are a few companies that try to scam travellers making online purchases and only include the VAT at the payment stage, so be sure to keep an eye out for this when purchasing a cheap flight ticket for example.
What is a VAT refund?
A VAT refund is the reimbursement of the VAT that you paid on goods purchased in Europe as a non-resident. If the product you bought included 20% of VAT, you can get the amount corresponding to this consumer tax paid back to you when you leave the territory.
One thing to keep in mind - get ready, some technicalities are coming your way - is that the VAT is calculated on the pretax base price of the item or service, NOT as a percentage of the final price. This means that you should NOT expect the VAT refund amount to be calculated on the final price: for an item taxed at a rate of 20%, for example, your VAT refund will generally be about 16.7% of the final price.
When can you get a VAT refund?
When am I eligible for a VAT refund?
You are eligible for a VAT refund when you purchase goods or merchandise (not services) in Europe and are not a permanent resident there.
If you permanently or habitually reside outside of the EU, you will likely be considered a “visitor” for VAT refund purposes when you travel to the old continent. In these cases you are not subject to the VAT and may be able to claim a refund. That’s because exports are exempt from VAT. When you purchase goods or merchandise in Europe and bring it back home, your purchase is regarded as an export. As a result, you can claim a VAT refund for it.
Note that you are NOT eligible for a VAT refund when you pay for a hotel night or a restaurant meal. That’s because those are services which are “consumed” in Europe instead of being exported. Unlike tourists, business travelers can also claim the tax they paid on lodging and meals - but it’s such a heavy process that only large companies that often resort to business travel for their employees dare to get into it.
To be entitled to a VAT refund, your purchases must be above a certain amount, which varies from country to country. In most cases, you have to spend that amount in one single location, so if you’re planning on shopping, try to keep that in mind. This minimum spend requirement was implemented to avoid administrative burdens over small-value items and is generally set at EUR 175 for the total purchase - however, some EU countries may choose to set lower thresholds.
Can you get a VAT refund after leaving Europe?
Yes, you have to leave Europe to claim your VAT refund. If you merely cross a border within the European Union, you won’t be eligible: the items have to leave the taxable area, not just the country where you purchased them, in order to count as an export.
Can I get a VAT refund when I leave the UK?
Yes, the same rules apply for the UK. Once you leave the borders of the United Kingdom to head back home, you can claim a refund for the VAT paid on your items.
How does a VAT refund work?
Can I get a VAT refund on online purchases?
Yes, you can get a VAT refund even for your online purchases. The same rules apply: you must be a permanent resident in a non-EU country and the amount you paid must be above the minimum prescribed by the country of the online store.
Can I get a VAT refund on hotels?
If you’re not a business traveller, no. VAT refund schemes don’t apply to hotel stays because those are regarded as services consumed on-site rather than exported goods.
Companies that often resort to business travel may submit a VAT refund claim, but this is the only exception.
How to claim a VAT refund?
There isn’t one standard procedure for the entire European Union, but most of the time, the following steps are essential.
1. Have a proof of residency
To initiate the refund process, you’ll have to present an ID which indicates that you’re not a resident of the EU. Your passport is probably your best bet.
2. Get the paperwork
The merchant will help you fill out the tax-free form. Make sure the information is correct and keep your receipts. Many typically tourist-oriented merchants will offer an instant refund as a service and mail your refund forms for you. You can spot those easily, as they will usually have a “tax free” sign on the door.
However, this tax-free shopping doesn’t change the fact that you still need to have the documents stamped at the border, since they use a third-party like Premier Tax Free or Global Blue to handle the refund claim. If the merchant offers a direct credit card or cash refund, you’ll likely pay a commission for the service.
3. At the airport
Bring your purchases, receipts and the refund forms to one of the VAT offices at the border crossing and allow some extra time prior to your departure. If your store hasn’t offered an instant refund, you may get your money at your last EU stop. Keep in mind that not all countries on the European continent are part of the EU. If you bought an expensive watch in Zurich, be sure to have your forms stamped before you cross the border.
There’s more: to be able to claim your VAT refund, you must be able to prove that the goods you purchased actually left the taxable area. In the European Union, it means that you can only claim a tax refund when you’re actually leaving the EU zone - you won’t be able to claim a refund of the VAT if you’re only travelling between two EU countries.
4. Go to customs
Here’s where you’ll need that extra time, as queues at the customs office may be long. Do this before you check-in your luggage, as the customs agent may want to make sure that you are indeed exporting the purchased goods. Once you’ve been cleared, they will add a customs stamp to your forms.
Note that in order to be eligible for a tax refund, the goods you purchased must be new and unused. Don’t use the items before getting through customs or you won’t get reimbursed.
You must also be able to show the goods to the customs officer, so make sure not to pack them in your checked luggage, or at least check if you’ll be able to get your checked luggage with you to customs.
5. Get your money
Now, even if you’ve followed all of the above, you won’t just get your money. If you’ve purchased your goods through a retailer who works with a particular refund service agent - find their desk at the airport and bring your stamped paperwork. Keep in mind that there’s a small commission fee, which will be deducted.
If that isn’t an option, then you’ll need to mail the refund documents and it will take several months before (and if) you hear back. If you’ve made your purchases using a credit card, then keep an eye on your statement, otherwise expect a cheque in the mail.
How long do VAT refunds take?
It takes about 3 weeks for your VAT refund to be paid back to your bank account. If you request a cash refund at the airport, you should get it immediately. PAyments by cheques also take about 3 weeks to be processed.
FAQ on VAT refunds
Are VAT refunds taxable?
No, you won’t pay taxes on your VAT refunds. Just make sure to keep proof of this VAT repayment in case the authorities need one.
Can I buy goods without paying the VAT?
No, the VAT is always included in the price and you won’t be able to purchase items and services without paying the VAT.
At best, you can get a refund directly from the merchant, if they do offer this service. Expect some additional paperwork in the store if you opt for that option.
Alternatively, you could ask the merchant to ship the items directly to your home, but in most cases, this is not financially beneficial for you. You will indeed have to pay shipping costs along with US duty.
The only way to avoid paying the VAT is to purchase goods at a duty free store, which you rarely find anywhere else than at an international airport.
Final Thoughts: Is It Worth Claiming a VAT Refund?
It depends. If you’re a problem-solver and frequent traveller, it’s probably worth it. If you only made a few purchases and are going after the economical advantage, it really depends.
Say you’ve gone shopping on your last trip to Paris and spent a total of $2,000 at Lafayette. The standard VAT rate in France is 20%, so assuming that all of your purchased goods qualify for a refund, you may be looking at a $400 refund. I’d say it’s worth it.
But there is no denying that since a lot of paperwork is involved, it’s a tedious process. Many travellers have also had their claim ignored and unanswered.
Got questions? Try contacting the national tax authorities or customs in the country of purchase.