Value-Added Tax Refunds, Explained

A travelers’ guide to the sometimes mysterious VAT

In nearly 200 countries, a “value-added tax" is a standard tax added to purchases, from designer handbags and eye-catching souvenirs to dining and hotel bills. For U.S.-based travelers, it’s somewhat of an enigma, as this tax is different than the sales tax applied in most states. However, VAT isn’t consistent from country to country — it’s known by other names like GST or consumption tax in some places — so even those more familiar with seeing that line on their receipts might not know all there is to know about the tax when traveling in other countries, including how to recoup those taxes. In many cases, non-resident tourists are eligible for a VAT refund when it’s time to head home, with some rules and stipulations.

When traveling to other countries, the most important thing to know about VAT is that it is widely variable, from the rate of the tax, the minimum spend, and where, when, and how to get a refund to even whether or not you can use your purchase before you apply for a refund. But with some VAT rates soaring to 20 percent or more of your purchase, it’s worth looking into.  

Countries have varying requirements regarding how much you must spend at minimum on one receipt in order to be eligible for a refund, and it’s a pretty broad range. In Spain, for instance, there’s no minimum purchase, but in Switzerland, it’s 300 Swiss francs (including VAT). While some countries will allow you to combine receipts to achieve that minimum spend, it’s usually limited to purchases that were made in the same store on the same day. Non-EU travelers can find guidelines for VAT in the EU here, as well as information specific to the Nordics here. Visitors to Korea can learn more on the Korea Customs Service website, Singapore tourists can get more info on the Singapore Customs site, and Japan shoppers can find details here. Newer to the world of VAT is the UAE, which began implementation of the tax in 2018.

Knowing that the path to your refund is varied based on your destination, it’s good to research the prevailing procedure before you set off on your journey so you can be prepared when you shop. Most locations will require you to present your passport when making a purchase so that they can supply you with the appropriate documentation that you’ll need to secure your refund, so it’s a good idea to always go shopping with your passport handy. Look for signs in the stores indicating “Tax-Free Shopping” or “Tax Refund,” and of course, when in doubt, ask a sales associate. There are forms required at point of purchase, so if you forget to request them, the road to recovering the taxes you pay becomes extremely complicated. It’s important to note that participating in VAT refunds is voluntary, so some stores may not offer shoppers VAT refunds at all, though larger retailers will generally offer this service.

That said, before you shop, you’ll want to decide the best (and hopefully, easiest) way to recoup the VAT you pay. The answer to this is usually through the help of a third-party app. The most popular are Global Blue or Planet, and they work in partnership with the retailer. Though these apps charge a fee, usually in the form of a percentage of your purchase and possibly an additional currency conversion fee, they’ll save you time and money throughout the process, doing all the work for you to recoup any refundable taxes paid.  

Another app, Pie, has a limited number of participating stores, mostly in Japan and a handful of European countries (Denmark, Sweden, Norway, Germany, and Finland), so you’ll want to make sure any tax-free shopping app will work in the country where you’re traveling as well as the places you think you’ll shop. Check to make sure the app applies not only to the country where you’re shopping, but your home country, as well.  

When you’re ready to go shopping, it’s a good idea to have an envelope or other organizer to keep all your receipts and paperwork in one place. Then, follow the instructions on the app you’ve chosen to upload your receipts and documentation — but hold onto the physical paperwork, as well. 

Not all purchases will be eligible for refund. For shoppers traveling on a tourist visa, purchases that are eligible are usually consumer products — clothes, electronics, souvenirs, etc. — and not things like hotel stays or dining.  

Perhaps most importantly, the majority of goods need to be in new, unopened, and unused condition when they leave the country, which means you need to save that fancy skin cream you bought in Seoul, or the chic bag you found in Lisbon, for when you return to home soil. 

When it’s time to head home, allow extra time at the airport to complete your refund request. Also, make sure you don’t pack up your new items in your checked luggage; you may have to show them to complete your refund application. Find a customs officer or digital kiosk to get the forms you received at point of purchase validated. Then, head to the kiosk for your chosen refund app, or if not available, drop your paperwork in a designated mailbox.  

The time it takes to receive your refund is contingent on a few factors, including which app you use to process your paperwork, whether someone is available to assist you at the designated kiosk at the airport or you have to mail in your documentation, and even the method you select for your refund. For instance, if you choose a cash refund, you can get your money right at the airport, but the exchange rate can be unfavorable in comparison to selecting a credit card refund, which may take a few extra days. If you weren’t able to complete the process at the airport and had to mail your documents, refunds may take up to a few weeks.  

The short answer to this question is: It depends. If it’s a significant purchase (think: a Loewe handbag, Gucci loafers, a Cartier bracelet), it’s likely worth the extra time and attention needed to recoup the tax, and even with the fees associated with the refund when the apps take their cut, there’s a good chance you’ll pay less than what you’d pay at home once your home country’s tax is tacked on. For smaller purchases, it might become more of an exercise in principle if you feel strongly that you shouldn’t pay the tax since you don’t reside in that country.

For tourists who know shopping is on the itinerary, a little prep and simple paperwork can pay off, and might even offer a small incentive to make that big purchase you’ve been dreaming of.