How to Claim a VAT Refund? Things you Need to Know

It is possible to receive a VAT refund if you are a visitor from outside the European Union.

As a result, travelers leave millions of dollars in refunds behind in unclaimed refunds every year, either because they are unaware of their rights – similar to flight compensation – or because they find the process too complicated.

The VAT rate is usually higher than sales tax in the US, so it’s unfortunate when items you buy can include up to 25% VAT. Save money on shopping in Europe by learning more about VAT refunds.

Also, read How to Calculate Import VAT UK and Duty?

There are a few things you should keep in mind.

What is VAT?

How to Claim a VAT Refund

As a consumption tax, both the value-added tax and the goods and services tax (GST) are paid by private consumers. There is no revenue tax associated with it.

During your trip to Europe, you will be charged a tax on the value added at every step of the supply chain, from production to sale.

A value-added tax is used in more than 160 countries, but it is most prevalent in the European Union. Depending on the country, it may be called VAT, TVA, IVA, MWS, and a few others.

Also, read What Is VAT Registration Number?

What is the VAT rate in Europe?

There is a general range of VAT rates among the European Union countries between 5 and 25%. They generally categorize their products and services as being “standard”, “reduced”, and “super-reduced.” according to their VAT rates.

Suppose you’re planning a trip to France, where some products include 20% VAT while others include 5.5 or 10%. VAT can be reduced to as little as 2.1% for super-reduced VAT.

You must keep in mind that the price you see on the label is what you pay: value-added taxes are systematically included in the price. When purchasing a cheap flight ticket, for example, keep an eye out for companies that scam travelers by only including the VAT at the payment stage.

What is a VAT refund?

How to Claim a VAT Refund

You can get a VAT refund if you purchased goods in Europe as a non-resident and paid VAT on them. When you leave the country, you can get your money back if you purchased a product with 20% VAT.

It is important for you to be aware of one thing, and prepare yourself – some technicalities will come your way – that the VAT will be calculated based on the pre-tax base price of the item or service, NOT as a percentage of the final price of the item. As a result, you should NOT be expecting the VAT refund amount to be calculated based on the final price of an item taxed at 20%, for example. For an item taxed at 20%, as an example, the VAT refund amount will generally be 16.7% of the final price.

Also, read What is VAT reverse charge?

How long does it take to get a VAT refund?

Is there a time when I can get a VAT refund?

If you are not a permanent resident of Europe and purchase goods or merchandise (not services) there, you are eligible for a VAT refund.

For VAT refund purposes, people who permanently reside outside the EU might be considered “visitors” if they travel to the continent. VAT is not applicable in these cases, so you may be eligible for a refund. This is due to the fact that exports are VAT-free. You are considered to be exporting goods or merchandise when you purchase them in Europe and bring them home. As a result, VAT can be refunded.  

When you book a hotel room or eat at a restaurant, you cannot claim a VAT refund. In other words, they are services that are consumed in Europe rather than exported. Tourists cannot claim the tax they paid, but business travelers can. However, the process is so lengthy that only large corporations that frequently travel for their employees can do it.

The amount of purchases you must make in order to qualify for a VAT refund varies by country. When shopping, keep in mind that you typically have to spend that amount in one place. For small-value items, the minimum spend requirement is generally EUR 175 – but some EU countries may set a lower threshold to avoid administrative burdens.

Is it possible to get a VAT refund after leaving Europe?

VAT refunds can only be claimed after leaving Europe. A merely cross-border purchase within the EU will not qualify: the goods must leave the taxable area in order to qualify as exports.

When I leave the UK, will I be able to get a VAT refund?

Yes, the UK follows the same rules. VAT paid on your items can be refunded once you leave the borders of the United Kingdom.

What is the process of a VAT refund?

Is it possible to get a VAT refund for online purchases?

If you make an online purchase, you can get a VAT refund. It’s the same rules as before: you have to be a permanent resident of a country outside the EU and pay at least the minimum amount prescribed by the country where the store is located.

Also, read What is VAT in Maths?

Is it possible to get a VAT refund on hotels?

No, if you’re not a business traveler. Hotel stays do not qualify for VAT refunds because they are considered services consumed on-site rather than exported goods.

A VAT refund may be claimed by companies that frequently travel for business, but this is the only exception.

What is the process for claiming a VAT refund?

Generally, these steps are essential when dealing with the European Union, but there isn’t a single standard procedure.

1. Proof of residency is required

You’ll need to provide an ID showing that you don’t reside in the EU to initiate the refund process. You’re probably best off using your passport.

2. Prepare the paperwork

Tax-free forms can be filled out by the merchant. Keep your receipts and verify the information. In most tourist-oriented merchants, you will be able to get an instant refund and the refund form will be mailed to you. A “tax free” sign will usually be posted on the door of those establishments.

However, tax-free shopping doesn’t mean you don’t have to get your documents stamped at the border because they use a third-party for refund claims, such as Premier Tax Free or Global Blue. There is likely to be a commission associated with direct credit card refunds or cash refunds.

Also, read What is £600 plus VAT?

3. Upon arrival at the airport

Be sure to prepare your purchases, receipts, and refund forms ahead of time and allow some extra time before departing. Your money may be refunded at your last stop in the EU if your store does not offer an instant refund. Several countries on the European continent are not members of the European Union. Before crossing the border, make sure your forms are stamped if you bought a costly watch in Zurich.

Additionally, you must be able to prove that the goods you purchased actually left the taxable area in order to claim your VAT refund. In the European Union, you can only claim a VAT refund when you leave the EU zone – if you travel between two EU countries, you can’t claim a VAT refund.

4. Go to customs

The customs office may have long queues, so you’ll need extra time here. Customs agents may want to confirm that the purchased items are indeed exported before you check your luggage. Forms will be stamped with a customs stamp once you have been cleared.

The goods you purchased must be new and unused in order to qualify for a tax refund. Before you go through customs, don’t use the items or you won’t receive a refund.

To ensure that the goods can be shown to the customs officer, do not pack them in your checked luggage, or at least check if you can bring your checked luggage with you.

Also, read What is £500 plus VAT?

5. Get your money

You won’t just get your money even if you follow all the above steps. Find the refund service agent’s desk at the airport if you purchased your items from a retailer that works with them. Taking into account the commission fee, which will be deducted, there is a small charge.

Alternatively, you can mail the refund documents, but it may take several months to hear back (if). Keep an eye on your credit card statement if you made your purchases with a credit card. Otherwise, expect a check in the mail.

Can you tell me how long it takes for VAT refunds to be processed?

Your VAT refund will be credited to your bank account within three weeks. Cash refunds should be given to you immediately at the airport if you request them. Check payments also take about three weeks to process.

FAQ on VAT refunds

How to Claim a VAT Refund

Is VAT refunded taxable?

In this case, there will be no tax on the VAT refund. If the authorities require proof of this VAT repayment, be sure to keep it.

Is it possible to buy goods without paying VAT?

You cannot buy items and services without paying VAT, since it is always included in the price.

If the merchant offers this service, you can get a refund directly from them. The store may require more paperwork if you choose that option.

In most cases, you will not benefit financially from ordering directly from the merchant. Shipping costs and US duties will indeed be charged.

A duty-free store, which can only be found at international airports, is the only place where you can avoid paying VAT.

Also, read VAT Threshold

Final Thoughts: Should You Claim Your VAT Refund?

Depending on the situation. In the case of problem-solvers and frequent travelers, it may be worth it. There are many factors to consider if you are only making a few purchases and looking for an economical advantage.

Let’s say you spent $2,000 at Lafayette in Paris during your last shopping trip. Based on France’s standard VAT rate of 20%, you may be able to claim a refund of $400 for all your purchased goods. It’s worth the effort, in my opinion.

The paperwork involved makes it a tedious process, but there is no denying that. It has also happened to many travelers that their claims have gone unanswered and ignored.

Do you have questions? In the country of purchase, you may need to contact the tax authority or customs.

Also, read How to Calculate VAT Inclusive?