Photo Credit: Uriel Mont
Get Back Money You Spend Overseas: Everything You Need to Know About VAT
Have you ever heard of the value-added tax refund or VAT? This international tax refund, most commonly found in countries within the European Union, is a way to get back the money you spent on merchandise while traveling abroad.
Found in over 100 other international countries, this refund can be obtained on clothes, shoes, handbags, and other items you purchased on your trip. However, there is a lot of information you need to know in order to properly acquire your refund before you travel back to the United States.
Here’s everything you need to know about VAT.
1. VAT Varies Depending On The Country & Items Purchased
Every year, tourists leave behind millions in unclaimed VAT dollars after their visit to Europe. The amount of VAT you’ll be refunded depends on a few factors. The first is what country you are in.
Depending on the country, VAT could vary between 7 and 27 percent. It also is based on what items you are purchasing. For example, goods like clothing and handbags have a different VAT than cosmetics.
Additionally, you must spend a certain amount at each retailer in order to receive a VAT refund. The refund can only be issued if you meet the minimum purchase threshold, for that country, in an individual retailer. You cannot request a refund on purchases totaled together from multiple merchants.
Remember that Switzerland, Norway, and Turkey are not in the EU, so if you’re traveling to these countries be sure to get your refund processed before crossing the border.
2. Have Your Passport
When you’re getting your refund paperwork at EU retailers, you must prove that you are a visitor to the country. This means having your passport in tow when shopping at boutiques and stores.
Most merchants in Europe participate in the VAT program and will sometimes have a sign on their window or register to indicate they are participants. If you’re ever unsure if a retailer is in the program, don’t hesitate to ask.
3. You Must Get Your Refund Documents At Your Retailer
Different retailers go about issuing refund paperwork in a variety of ways. Some may issue a refund immediately to the credit card you are using at the time of purchase. Others may even handle all the paperwork for you instead of you processing it at the airport before leaving the country.
If you are given your receipt and refund documents at the retailer but do not receive the refund on the spot, you will have to process your refund at customs at the airport.
4. Arrive At The Airport Early To Go To Customs
The line at customs in any country can get really long, so be sure to arrive at the airport with enough time to both find customs and wait in line. You want to have your passport, purchasing receipt, and refund documents ready to present to the export officer.
You also need to have the item that you purchased available for them to inspect before approving your refund. So don’t put it in your checked baggage! Once you go through customs, they will stamp your paperwork, so you can receive your refund.
Another important rule of thumb is, don’t wear the items you’re getting a refund on to the airport. You can only receive a VAT refund on items that are unused until you leave the country, so it might not be wise to sport your new LV handbag through customs.
5. There’s Multiple Ways to Collect Payment
Once you receive your stamp, you will either receive payment immediately or have to take additional steps to receive your refund.
If the merchant you purchased the goods from works with a refund service like Global Blue or Planet, you can walk up to their kiosk in the terminal where they will charge you a fee and issue you a cash refund immediately. The funds will be refunded in the currency of the country that the purchase was made, so it’s up to you if you want to convert it to US dollars.
If you’re not able to work with a refund service, you’ll have to mail your refund documents in and could possibly wait months to receive your money. This can be a long and taxing process and some people have mentioned they never received their VAT refund after processing through the mail.
6. Be Careful If You’re Traveling By Train
If you’re traveling by train, be sure to get off at the last EU train stop to process your VAT refund. You can go from an EU country to a non-EU country without even noticing when traveling by train so don’t miss out on a chance to get your money before you leave.
7. Remember All Purchases Are Not Refundable Under VAT
There are many purchases made overseas that are not refundable under the VAT program. These items include:
- Vintage items
- Services like hotels and money spent on meals
- Items purchased in tax-free zones
- Things not returning to the US
- Knockoff and counterfeit merchandise
- Transactions that do not meet the minimum purchase threshold for that country