European vacations often entail substantial expenses, further compounded by various taxes and fees. These may include foreign transaction fees, city-specific tourist taxes, and value added tax (VAT) on goods and services. While European residents must pay VAT, foreign visitors can potentially claim refunds on certain purchases. This small travel guide details how to recoup some costs during your European travels.
VAT in Europe: can you get your money back?
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What exactly is VAT?
Value added tax (VAT) is an indirect tax applied by 175 countries globally, including the 27 European Union member states and other European nations. It's analogous to the sales tax in the United States, which is levied on goods rather than services.
The VAT percentage varies across countries. Hungary imposes the highest VAT in Europe at 27%, while Switzerland has the lowest rate at 8.1%. Within the EU, the minimum VAT rate is 15%, with no maximum; the average rate is 21.8%.
VAT generates government revenue by applying a flat rate to goods and services at each supply chain stage, resulting in multiple VAT payments. Typically, manufacturers pay VAT on raw materials, retailers pay VAT on manufactured goods, and consumers pay VAT on personal purchases.
To illustrate VAT, consider a T-shirt business in France, where VAT is 20%. Initially, the manufacturer pays €1 for materials, including €0.20 VAT, totaling €1.20. The retailer buys the shirt for €6 (€5 plus €1 VAT), allowing the manufacturer to recover their initial VAT while passing 20% of their margin to the government. The retailer sells the shirt for €10 to the consumer, who pays an additional €2 VAT, covering the full VAT amount.
Who can get a VAT refund?
Foreign visitors to Europe should consider several factors for VAT refund eligibility. EU regulations establish general guidelines, but non-EU countries may have different requirements, though the process is generally similar.
VAT refund rules
- Refunds apply only to physical goods carried in personal luggage, excluding services like hotels or meals.
- Goods must be purchased within the last 3 months.
- Each transaction must exceed a minimum purchase amount (in local currency), varying by country (e.g., €100 in France).
- Proof of non-EU or non-European residence is required.
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Steps to request a VAT refund
The VAT refund process begins at the point of purchase. For eligible items, request a VAT refund form from the retailer. Many tourist-oriented shops participate; if unsure, inquire with store staff.
To complete the form, the retailer will need your passport and other details, so carry it while shopping.
Verify the form's accuracy and ensure both you and the retailer sign it. The form will detail the purchase amount and refund. Keep this form and receipts secure for airport processing.
Some retailers may offer immediate refunds, provided you mail stamped customs forms later.
Otherwise, visit the airport customs or tax refund office with your retailer-provided VAT form. These offices are typically located landside, before security and are clearly marked.
If your documents are correct and you haven't received a retailer refund, the customs officer will stamp your form, and the refund will be processed at the airport (minus any service fees). Refunds are either immediate in local currency or credited to your card within days.
VAT refund tips
- Allow ample airport time for the refund process.
- Carry purchased items in case the customs officer requests to see them.
- Form rejection reasons include missing retailer signatures, non-personal goods, or inability to present items.
- Claim refunds before leaving Europe, as retroactive refunds are impossible.
- If traveling to another EU country, claim the refund in the last EU country before departure. For non-EU countries, claim the refund in the purchase country.
- If refunded by the retailer, mail stamped customs forms within 3 months to avoid refund cancellation and full VAT charges.
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