Tax free or tax off means a lot to the serious shopper. Whether you're a buyer of big ticket items or a big buyer of any ticket items, you'll love the Value Added Tax system employed by many European nations and the Goods and Services Tax system utilized by our friendly northern neighbor in Canada that subscribe to these tourism-promoting services. But you'll have to pay attention. The ins and outs of "Value Added" and "Goods and Services" taxes can confuse even the keenest of economic minds.
First, a definition. Value Added Tax is a tax levied on the difference between a product's price before taxes are applied and the cost after the product is produced. Natives of a country where these taxes are enforced have to pay the tax. Tourists do not. Even American travelers aware of the VAT refund system don't use the service. It can be cumbersome and difficult to obtain refunds. But here's how.
An important figure in receiving a Value Added Tax refund is the amount of money a consumer has to spend on products in countries. Don't worry. The numbers aren't that high. (See the chart below.) More importantly, the retailer where you are shopping needs to be a participant in the program. Once these two criteria have been met, travelers simply have to collect their receipts from the retailer, fill out forms given to them by retailers or in some cases hotels, and redeem their forms with officials at customs before leaving Europe or Canada, where the programs are available. Once the forms have been officially stamped, the consumer can either mail the forms in and wait for the refund or go to a special booth at the airport in their departure city.
One thing to remember: shoppers in search of a refund are obligated to go to the refund booth in the country where they bought the goods. This can be difficult when traveling to many European countries by train and departing via airplane from only one of the countries visited.
In some countries, the VAT can be hefty. See the chart below for savings on VAT purchases and the amount of money spent necessary in a particular country to receive the benefit.
|Country||Value Added Tax||Minimum Purchase Requirement|
|Belgium||21%||125€ or US$162|
|Canada||7%||$200 CAN or US$160 *|
|Czech Republic||22%||2500 Czech Kroners or US$107|
|Denmark||25%||301 Danish Kroners or US$52|
|France||19.6%||175€ or US$227|
|Germany||16%||30€ or US $38|
|Italy||20%||155€ or US$201|
|Netherlands||6% or 19%||137€ or $178|
|Norway||24%||310 Norwegian Kroners or US$48|
|Portugal||19%||60€ or US $77|
|Spain||16%||90€ or US$116|
|Sweden||25%||200 Swedish Kroners or US$28|
|United Kingdom||17.5%||20£ or US$37|
Global Refund (tel. 800/566-9828; www.globalrefund.com) is the driving force behind the Value Added Tax refund system on the supplier side. It's their "Tax Free Shopping" sign that you should look for in the window of the retail stores. (The sign should be next to the Credit Card stickers near the front door advertising what cards the store takes.) If you want to receive your refund at the airport, you need to go to the refund booth when you are departing the country where you did your purchasing. Your best bet in this case is to get the stamps at customs and mail the refund tickets in. If you can not get a stamp at customs for all your purchases, call Global Refund at the number above for alternative methods to receive your refund. Also, the Global Refund Web site lists airports, train stations and border points where refund offices are located. In addition to the European Union, Global Refund has added some participating countries such as Argentina, Korea and Iceland to its list.
In Canada, refunds are easier to obtain. You need to spend a minimum of Canadian $200 (US$161) to qualify for refunds with individual purchases more than Canadian $50 (US$40). In Canada, however, lodging is included in their Goods and Services Tax, even camping fees and short-term rentals. (To qualify for the lodging refund, just stay less than a month and include the number of nights you stayed at a particular location. One caveat about Canada -- you need to show original receipts to receive your refund. Photocopies will not suffice. For detailed information on obtaining the proper forms for a Canadian refund and all other non-Canadian resident tax information, go the Canadian governments tax and revenue site at www.cra-arc.gc.ca/tax/nonresidents/visitors/menu-e.html.
Passports are required to get the proper refund forms from retail clerks and hotel employees. And don't wear or use any of your purchases. They must be unused when you leave the country to receive your refund. Yes, customs will inspect your purchases and they will look thoroughly through all the items for which you have receipts. Some of the airports have drop boxes for VAT refunds making it easy to get the refund process in motion and out of your hands even before you leave the country.
Do you have comments or questions about VAT refunds? Click over to our Tips, Tools and Deals Message Boards to join the discussion.