Travellers visiting Europe often pay taxes that are bundled into the prices of goods and services. These taxes are widespread across European Union countries and are even charged on hotel rates and restaurant meals. For visitors from outside the EU, the taxes paid on certain consumer goods they plan to take home are refundable upon departure.
In Europe, value-added taxes – or VAT – are charged at the national level and accumulate at each phase of production, marketing and distribution. As these taxes are typically included in the retail price, shoppers may not realise they are paying them.
VAT tax rates and minimum thresholds for qualifying purchases vary by country. Across Europe, VAT rates range from 8.1 per cent to 27 per cent and average 21.9 pe rcent.
Many countries impose a minimum purchase value from a single vendor to be eligible for a VAT refund. Spain, where there is no minimum to apply for a refund, is an exception. The guidelines in France are more typical; there, consumers must spend 100 euros (about US$114 or S$144) at a participating retailer, where the purchase can be a single item or several rung up together.
Because the process is not synchronised by the European Commission, the executive branch of the European Union that oversees national tax rules, procedures vary and can be confusing. While travellers should check with the retailer for specific instructions, here are the steps to take in order to get a VAT refund in Europe.
TAKE YOUR PASSPORT, KEEP YOUR RECEIPTS
According to a spokeswoman at the European Commission, VAT refunds are available for certain goods, “namely those that can be carried in personal luggage.” Big-ticket items like cars and yachts are excluded and individual countries may also exclude specific items.
When shopping in Europe, keep your sales receipts. Shops that participate in tax-refund programmes usually have an identifying sign in the window or at the register. The goods must be new, so don’t expect a tax refund on a vintage vase; and unused, so if you buy a ski jacket in Cortina d’Ampezzo and use it while skiing there, it’s ineligible. A vendor may even wrap and seal your purchase, preventing you from using it while you are travelling in order to qualify for a refund.
In addition to the receipt, make sure you get a VAT refund form from the shopkeeper, showing the transaction date.
Refunds are only available to non-EU citizens on personal purchases that are not for resale. Retailers must verify citizenship using the buyer’s passport, so make sure you have it with you when shopping.
BE TIMELY
Tax refunds are only available on items taken out of the European Union within three months of purchase.
You may move between member countries within that window, but can only apply for a refund when you are leaving the European Union.
FILE AT THE POINT OF DEPARTURE
Foreign travellers can apply for a tax refund at their point of departure from the European Union. This may be the Eurostar train station in Paris for an England-bound express train.
For most Americans, the point of departure will be an international airport where they can expect to find VAT refund desks near customs or currency exchanges.
Travellers must have their refund application stamped by a customs agent who may ask to see the item you purchased. Be prepared to pack anything you’ve purchased and hope to get a refund on in your carry on bag.
Sometimes customs offices handle the refund. At other times, travellers must use services such as Global Blue and Planet to expedite their refund filings, for a fee. (Shops or services that offer automatic tax refunds at the point of sale usually require travellers to send their stamped customs forms in, or risk having the refund rescinded.)
Refunds are usually offered in the currency of the country you are departing. They can be made in cash or to the credit card used for the purchase.
Because of the many steps involved in applying for a refund – and the lines at refund desks – travellers should allow extra time at the airport or train station.
LOOK FOR REFUNDS IN ASIA AND AFRICA
Europe isn’t the only place to look for value-added taxes and their refunds. More than 170 countries charge value-added taxes or their equivalent.
Not all of these are refundable to American travellers, but many countries in Asia, Africa and Latin America offer refunds.
Alexander Smith, an associate professor of economics at Worcester Polytechnic Institute in Worcester, Mass, said he recently applied for and received refunds for purchases in Japan, which was seamless, and in South Africa, where he nearly missed his flight trying to complete the paperwork.
“Ten, 15 or 20 per cent on a small purchase may not be worth it but if you have something of value, it can be a nice discount,” he said.
DECLARE YOUR PURCHASES WHEN RETURNING TO SINGAPORE
Travellers returning to Singapore may have to declare their overseas purchases and pay Goods and Services Tax (GST), even if they have received a VAT refund abroad.
Those who have been away for 48 hours or more are eligible for GST relief of up to S$500 on qualifying purchases, while those away for less than 48 hours are eligible for up to S$100. GST is payable on the amount exceeding these limits.
Travellers can declare their purchases and pay any applicable GST before arriving in Singapore through the Customs@SG web application.
By Elaine Glusac © The New York Times.
A version of this article originally appeared in The New York Times.