In short, tax-free shopping is when the tax a tourist pays on an item they purchased while visiting a foreign country is returned to them at the point of exit (customs).
The aim of this process is to avoid charging a country’s value added tax to people who do not live in, but are simply visiting a country.
In this article, we will explain to you how to take advantage of tax-free shopping in Europe.
Whenever you travel to a country in Europe and purchase goods subject to “value added tax,” it may be possible to get a refund on the VAT included in the price.
However, in order to get your refund and successfully shop tax-free in Europe, there are a few rules you must follow.
For more details about how much of a VAT refund you can get, and in which countries, check out our Tax-free Refund Calculator.
Tax Free Refunds Step by Step
The process for getting a VAT refund begins at the store where you buy your tax-free items and ends at the airport when you leave.
Step 1 – Ask the staff for a form at the store where you plan to shop tax-free.
This tax refund form may not be available in all stores. So before you begin, you will need to check if they offer tax-free shopping. Generally, at stores where they offer VAT returns you will find a sign advertising tax-free shopping on the shop window or other visible area on the front of the store.
If you see such a sign, you can be sure you will get a tax-free refund on the products you buy at that store.
Step 2 – Find out which company provides the VAT refund services for that store. The name of this company should be written somewhere on the form they give you.
Step 3 – Find out what the address of that company is. These companies often have offices in one or more locations throughout the city, as well as wherever you see signs that read “VAT Refund Office” or “Tax Refunds” in the airport.
Step 4 – Have your tax-free form approved by a customs officer at the airport you are departing from.
Step 5 – Visit the office of your tax refund agent at the airport with your approved form and complete the VAT refund process.
If you decide to visit the corporate office of the VAT refund firm in the city you are visiting, you will still need to have your form stamped by a customs officer as you leave the airport. You will then need to send the stamped version of the tax-free form later by post to the refund agent.
That’s it. Once all the forms are complete and in the right hands, your VAT refund will quickly be on its way.
Some things to keep in mind:
- In order for everything to run smoothly, you must hold a tourist visa.
- If your visa is valid for more than 3 months, you will not be eligible for VAT refunds.
- To get a refund on a product you need to have purchased it yourself.
- You should not open nor use any of your tax-free shopping until you have applied for your refund and officially left the country.
Getting a VAT Refund at the Airport
You may be able to receive your VAT refund in cash right at the airport, depending on the country and airport you are traveling to.
You will need to take the documents you filled in at the store, have them approved at customs, and then present them at the airport offices of the appropriate VAT refund company.
The officer there will review your purchased goods, check your VAT refund forms, and confirm your transaction. If possible, you will even get your tax-free refund in cash right at the airport. Please be aware that in such cases the commission charged will often be slightly higher.
Note: We advise you to arrive at the airport early, as there may be many people ahead of you waiting to complete their tax-free refund transactions as well – especially at larger airports.
What Products Are Subject to VAT Refunds?
Although conditions may vary from country to country, VAT refunds are generally not available for these types of purchases:
- services (e.g. hotels, accommodation, transportation and flight expenses)
- food products (including any kind of food and drink)
- items purchased at the airport (they are usually already tax-free)
- products too large to fit in a suitcase
In order to benefit from tax-free shopping, your purchases must reach the minimum purchase threshold determined by each country. This minimum threshold is usually not very high. Although it can reach up to 100 euros in some countries, it generally ranges between 20 euros to 30 euros.
Another thing to be aware of is that the minimum purchase threshold may also vary by store. For example, a store may set a minimum spending threshold of 70 euros even though the official threshold in the country may only be 20 euros.
What is the Tax Free Rate?
Tax-free rates vary by product and country, but are usually between 10% and 20%. In fact, though you will officially be refunded the full VAT rate of the country you are visiting, you will not receive the entire amount because the VAT refund company acting as the intermediary will take commission on the transaction.
The main factors that will determine your VAT refund rate are:
- the country where you bought the product.
- whether you request a refund via card or cash.
- the type of product you purchased.
- the sum total of your purchases.
As the total amount you spend on your purchases increases, the percentage you receive back on your tax-free shopping will also increase.
An Example of the VAT Refund Process
Let’s take a look at how a VAT refund is calculated in Germany for a mobile phone worth 1,000 euros.
The VAT rate in Germany is 19%. In other words, approximately 160 euros of the 1,000 euros you paid went towards VAT.
Although different tax refund companies will offer different rates, on average you can expect to get back approximately 114 euros of the 160 euros you paid in VAT in Germany.
In other words, if you spend a total of 1,000 euros, you will get around 114 euros back.
By entering varying amounts into our Tax-free Refund Calculator for Germany, you can find out how much of a refund you can expect to get on different purchases.
Note: The most common mistake made when calculating your VAT refund is to arrive at an estimate by multiplying the VAT (19%) by your product’s price. The 19% VAT is already included in the price of your purchase. Therefore, you need to figure out what the original price of the product was before VAT was added. In this example, 119% of 840 euros equals 1,000 euros. In other words, your VAT total would have been equal to 160 euros.
Tax Free in Germany and Other European Countries
In order to receive a VAT refund in Germany, the total price of your purchase on one or more tax-free goods must be a minimum of 25 euros.
The tax-free rate in Germany, just like in other countries, varies according to the nature of the product. Different VAT rates apply to different product categories.
Outside of Germany, the main European countries that issue VAT refunds are: Austria, Belgium, the Czech Republic, France, Denmark, Estonia, Croatia, the Netherlands, Ireland, Iceland, Italy, Spain, Sweden, Switzerland, Cyprus, Hungary, Norway, Poland, Slovenia, Slovakia, Luxembourg, Turkey and Greece.
Note: Since Brexit you can no longer shop tax-free in the UK.
Tax Free Refund Companies
There are two globally well-known VAT refund companies:
- Global Blue
- Planet Payment
These two companies operate in most countries where you can shop tax-free in Europe. The offices of these two companies can easily be located in cities and airports across Europe.
Apart from these companies, you may also encounter a variety of firms that work locally in specific countries.
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