Trimming the VAT - How to Save Money on Your Holiday Purchases
Many countries offer tourists tax refunds. The trick is knowing all the rules for getting your money back. We list them here.
We compare prices, look for sales and try to save a few shekels on nearly every purchase. But many people aren't aware that when shopping abroad, you can save a great deal by receiving a refund on the local value-added tax at the airport, just before boarding the plane.
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"It's not something travelers commonly know about, and not everyone who's aware of the option always knows where and how to do it," says Anat Fogel, a tour guide with Natour travel agency. "Only businesspeople or frequent fliers know the ropes, but I don't see many Israelis arriving at the airport with receipts in hand running to claim VAT refunds."
Tax refunds can be claimed in many countries, including Britain, France, Spain, Germany, Singapore and Argentina, but the percentage returned varies from country to country.
The refund can be received in cash or as a credit on a credit card or bank account, depending on your choice. Either way, if you run up enough of a tab shopping, the refund can amount to hundreds of shekels.
We consulted with experts and gathered the vital information you should know about VAT refunds, to help you save a little on your purchases overseas.
1. Look for the signs in the store
Before entering a shop, pay attention to the signs. Only stores advertising "tax-free shopping" have merchandise that will entitle you to receive a refund. "In Asian countries like Thailand or India, there's less likelihood you'll manage to obtain a VAT refund, because many stores aren't certified for the refund," says Benny Gamlieli, a senior guide at Ofakim Organized Tours. "Even if you bought 30 pairs of jeans for $1,000 they won't refund even a cent, and now you just need to pray you won't be fined for excess weight." In any case, Gamlieli says the sign should be prominently displayed for everyone to see on the front door or storefront window.
2. The receipt itself isn't enough
Don’t bother waiting in line at the refund counter at the airport if all you have is a receipt on your purchase, because it won't do you any good. You must ask the sales clerk at the store for a VAT refund request form, on which you'll need to fill in your personal information and the details of the items you've purchased. The clerk needs to sign the form, and he/she might ask you to produce your passport to verify that you are indeed a tourist, so don’t leave it back at the hotel when you go out shopping. Fogel recommends making sure the clerk fills out the form properly. "The sales clerks often fill out the forms for you, and when you reach the airport it turns out he's forgotten some little detail that invalidates the whole form, and you won't be able to receive the refund," she says. "I recommend always checking to see that the salesperson filled out the entire form, including the catalog number and the name of the product."
3. Not on every product or price
There's always fine print, and in this case it covers categories eligible for VAT refunds. For instance, there are refunds on clothing but not on restaurants or hotels. "You can eat at a fancy restaurant for 500 euros and not get a penny back," says Gamlieli. It's only relevant for products such as clothes, cosmetics, and electronics - and only then for purchases costing a minimum amount. For example, in Paris you will need to spend at least 175 euros to get a refund, in Milan at least 155 euros, and in London at least 30 pounds sterling.
4. Only from the same store
Many Israelis traveling abroad spend more than the minimum required for a VAT refund but still aren't eligible for the coveted reimbursement. Only receipts on purchases made at the same store - or at least the same retail chain - entitle you to receive any money back. Few Israeli tourists are troubled by VAT refund considerations when choosing where to buy another electronic gadget or jacket, which is a shame because you can lower the cost of your total purchases if you can buy a similar item at the same store where you have already shopped.
5. There's no full refund
In Hungary, you pay a VAT rate of 27%, and in Britain and France 20%, but the amount you will be refunded is less because of the fee collected by the company that manages the refund operations (in Israel, where tourists are entitled to a refund, as well, it is Milgam Municipal Services). In France, you would receive 39 euros back on purchases totaling 300 euros, while in Britain you would be entitled to 34.50 pounds sterling on purchases of 300 pounds. Tourists visiting Israel would receive a NIS 50 reimbursement on receipts of NIS 400. Globalblue.com offers an online refund calculator to help check whether the saving is worth the hassle.
6. Get your refund before checking in your bags
Most travelers are tempted to stand in line for the luggage check-in immediately after they arrive at the airport, before the queue gets too long, leaving themselves plenty of time for a relaxed cup of coffee afterward. But if you want your VAT refund, the word is, don't. You stand a good chance of not getting your money back if you do. The receipts and form stamped by the store are often insufficient. The clerk at the VAT refund counter will also ask to see the actual items purchased, to ensure that they're brand new and you're taking them out of the country. It's best to keep your purchases handy, perhaps even in a separate bag, so you won't have to search through your suitcase for them.
7. VAT refund information
Beyond providing general guidelines, the Globalblue.com application offers a list of authorized stores on which VAT can be refunded. The store listings come with a map showing their location and a link to their website. The map can be downloaded to a cellphone to make it available when there's no Wi-Fi connection. You won't need to remember the names of stores you're interested in: Just enter them into the "My trip" folder. The app will also guide you to the VAT-refund station at the airport and tell you when it's open.
