If you have ever shopped abroad, you may have noticed a Value Added Tax or VAT. But there is one detail that many travelers forget: if you visit a country with such a tax, you may be able to get a refund on part of what you paid for a good or service.
There is no VAT in the United States, but more than 100 countries have one, according to the US Council for International Business. Learning more about the process of getting a refund can save you money.
Reclaiming your VAT, however, isn’t that simple, says Melissa Klurman, travel journalist at The Points Guy. In some cases, “you can’t just show up and show someone your receipts,” she says. “You have to fill out the paperwork and you have to pay attention to the rules.”
Here’s how VAT works and how to claim it.
VAT versus sales tax
In the United States, shoppers are used to seeing sales tax on the items they purchase. “VAT is different from sales tax,” says Klurman. “If you go to New York and buy pants, you go to the checkout and pay sales tax.” Sales tax only appears when a customer actually makes the purchase, so only the customer pays the tax.
Video by Helen Zhao
VAT, on the other hand, is “a multi-step sales tax”, according to the European Commission. This means that it is paid for by everyone who interacts with the product or service. Technically speaking, it is levied on the gross profit of the good or service at each point of manufacture, distribution and when the item or good is sold, according to the Tax Foundation. “VAT has already been built into the overall price of the item,” Klurman says.
“VAT goes to health care and other social services that only EU members receive or benefit from,” Klurman says. This is why US visitors may be eligible for a refund.
VAT varies by country
Each country with VAT has a different percentage they charge, a threshold on the eligible amount, and a different refund rate.
For example, let’s say you buy a handbag in France where there is 20% VAT. To qualify for VAT in France, you must purchase €175 worth of goods from the same store. If the handbag costs €300, the merchant keeps €240 and hands over €60 to the government. This is where the savings come in: the refund rate in France is 14% of the purchase amount, so you may be eligible for a refund of €34.71, according to a VAT calculator from TaxFreePlus. had.
How to request a VAT refund
How you claim the VAT refund depends on where you shop. If you’re at a high-end store, they’ll often have an office that will help you fill out the necessary paperwork to get a VAT refund, “but you’ll still need to submit your paperwork at the airport,” Klurman says. . Other times, there may be more legwork on your part.
Here are some of the steps travelers may have to follow, according to the European Commission.
- Ask the store: See if they’ll help you complete the necessary paperwork and find out what price threshold applies for refund eligibility. It may also be worth asking if the store does the refunding itself and if there is a charge for this service.
- Be prepared with proof when purchasing: you may need to show your passport or other ID document proving your residence outside the EU, as well as your departure details. The seller will ask you to fill out a form with the necessary details.
- Keep your documents for customs: You must present the store invoice, the completed refund form and the goods purchased, among other documents, to customs officials in the last EU country you leave. Customs officers must stamp the form as proof of export.
From there, you may need to send these completed documents (your reimbursement form will indicate where). Or there might be an opportunity to get a refund faster. “At some major ports and airports, you may be able to get a refund immediately once customs officials have stamped your form, provided the store you purchased the goods from uses this option,” according to the European Commission.
“It can go straight back to your bank account or be automatically refunded to your credit card depending on how you request it,” Klurman explains.
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