How to claim VAT refund?

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 behind in unclaimed refunds, either because they are unaware of it - similar to their right to compensation, or simply because they find it too difficult to deal with. Here are a few key points to keep in mind.

What is VAT?

The value-added tax (VAT) along with the goods and services tax (GST) is a consumption tax paid by the private consumer. For example, a computer manufacturer will pay the VAT on all of the supplies necessary to produce the item and get it to the store, while the consumer will pay the VAT on the retail price minus the production costs on which the manufacturer has already been taxed. In the European Union, the VAT rate ranges from 15 to 25 percent per country.

Eligibility

If you permanently or habitually reside outside of the EU, you will likely be considered a “visitor” for VAT refund purposes. In these cases you are not subject to the VAT and may be able to claim a refund. Unlike tourists, business travellers can also claim the tax they paid on lodging and meals.

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.

Claiming your VAT refund

There isn’t one standard procedure for the entire European Union, but most of the time, the following steps are essential.

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.

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 forms for you. However, that doesn’t change the fact that you still need to have the documents stamped at the border.

At the airport - bring your purchases, receipts and the forms at the border 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.

Go to customs - here’s where you’ll need that extra time, as line ups may be long. Do this before you check-in your luggage, as the officer may want to make sure that you are indeed exporting the purchased goods. Once you’ve been cleared, they will stamp your forms.

Getting 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 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.

So is it worth it going through all that to claim your VAT? It depends. If you’re a problem-solver and like to do it for the sport - then you can probably even teach us a thing or two. If you 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 $400 refund.

Got questions? Try contacting the national tax authorities or customs in the country of purchase.