How does a 20 to 25 per cent refund on anything you buy in Europe and bring home sound? Because that's the sugar-coated promise that many retailers on London's Oxford Street, along the Champs-Elysees in Paris and on Rome's Via Condotti hold out as bait, and from the retailer's viewpoint it works, although it doesn't always pan out exactly as sweetly for the consumer.
While most countries hit shoppers with VAT or GST, these taxes are highest in Europe. As much as 27 per cent in the case of Hungary, although 20-25 per cent is common throughout the European Union. The EU allows visitors who are non-residents to obtain a refund of that VAT. While the system for obtaining a refund looks simple enough, in practice it involves a series of bureaucratic gymnastics. Miss just one step and you dud yourself out of any refund.
Understanding the Rules
You need to make a minimum purchase and the standard amount for the EU is €175 although some countries have a lower threshold. In Spain the minimum is €90.15, in Italy it's the slightly bizarre figure of €154.94. That amount must be spent in one shop, although the purchase might consist of several separate items.
When you visit the shop, ask whether they participate in the VAT refund scheme and check how much you need to spend to qualify. You'll need to produce your passport to prove your status as a non-EU resident.
You'll be given paperwork and the shop assistant will fill in their part of the form. Some stores offer on-the-spot refunds but this will usually happen only in the case of a large department store. At your point of departure from the EU, which might not be the same as the country of purchase, you need to produce the goods, the invoice showing payment and the completed refund form from the store. Customs officials must stamp the form to prove the goods are being exported. At international airports you can usually find a refund booth where you can obtain a full refund of the VAT, either in cash or credited to your card. Arrive early – there are often queues.
If there is no refund facility when you leave the EU, you need to return the documentation to the retailer or to the address they've provided on the form. Patience is required – it may take up to 10 weeks for this to happen and you might not get the full amount since some retailers charge a fee for this service.
Agency Facilitated Refunds
There are a couple of agencies that offer to streamline the process, with refund counters located at major airports and also in some major shopping areas. The main ones are Global Blue and Planet Payment. After you've had your tax refund paperwork validated at the airport as you are about to depart the EU, find the agency's refund counter in the terminal, hand over the paperwork and you'll get an instant refund, minus a service fee.
These agencies carve off a fair chunk of the refund. For example if you've bought a jacket for €200 in France, the refund according to the Global Blue calculator is just €24, even though the VAT on the jacket was €40. Spend 500 krone in Denmark and you'll get 61 back, just over 12 per cent. Global Blue gets to keep more than you do since the VAT in Denmark is 25 per cent.
Britain, Changes After Brexit
Brexit, which takes effect on 30 March 2019, might require some adjustment to the way you shop in Britain.
VAT in Britain is 20 per cent, although books and children's clothing are excluded. Under the Retail Export Scheme, also known as tax-free shopping, visitors can claim a refund for goods they purchase however not all retailers participate in the scheme, and different shops will have different minimum-purchase conditions, although £75 is the norm in any single outlet. At the point of purchase you need to obtain a VAT407 form from the retailer. Before Brexit, present the paperwork and the goods at the point of departure from the EU, following standard procedure to obtain your refund.
After Brexit, Britain will no longer be part of the EU's VAT refund scheme, but the British government has confirmed the country's VAT system will remain in force, and the current Retail Export Scheme should continue to operate with no changes. However since Britain will no longer be part of the EU after March 30, 2019 you need to reclaim any VAT you've paid on goods purchased in Britain when you leave Britain, even if you're going to another EU destination. Once Brexit takes effect, it can be assumed that British residents who buy goods in Europe will also be eligible for a refund of the VAT on goods purchased within the EU and exported to Britain.
Shopping in Europe's Non-EU Countries
Similarly, for other European countries that are not part of the EU such as Switzerland and Norway, you need to claim your VAT refund in those countries, not within the EU. The VAT in Switzerland is 7.7 per cent, and a refund is only available on goods with a purchase price of over CHF 300. The process for obtaining a refund is similar as in the EU. At the shop, request a Tax Free Form and when you leave Switzerland, present the completed form, the goods, receipt and your passport to Swiss Customs. The goods must be sealed in their original packaging. Present the stamped Tax Free Form to the nearest Refund Office and the VAT will be refunded to your credit card.
Exiting the EU by train for a non-EU country makes obtaining a VAT refund problematic. For example if you travel by train from Italy to Switzerland you probably won't pass through customs, and therefore there is no Italian Customs officer who could authenticate the documentation relating to your purchases. If you then leave Switzerland to return to Australia, you've blown your chance of a refund. The same applies if you're travelling in a vehicle, you probably won't find a customs officer when you exit the EU for a non-EU country.
A simpler way around this is to buy duty-free at the airport but remember that airport retail space is some of the world's most expensive. Even though you'll dodge the hefty VAT you need to be sure you're getting a bargain. Also, if you buy duty-free wines or spirits and your return journey involves a transit stop anywhere along the way, any liquids over 100mls will be confiscated at the last port before you re-board your aircraft en route to Australia. That's down to Australian government regulations, no exceptions, even if it's sealed in a tamper-proof bag with documentation attached. The way around this is to buy your duty-free liquor at the very last port before Australia, or on board the aircraft.
The duty-free allowance when you re-enter Australia is $900 for anyone over 18. That figure should be separate from any tax you have paid on the items, a fact not always recognised by officers of the Australian Customs Service, and it's worth arguing the case. You might have to pay tax on purchases over $900, tax excluded, however if you've used or worn the goods while overseas Australia Customs can depreciate their value at the discretion of the Customs officer, with a break to you.