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How the VAT Refund Works

When traveling in Europe, it can be hard to keep track of how much money you’re spending. If the conversion rate is enough to make you stop and do some quick math in your head, thinking about the EU VAT tax probably isn’t something you want to add to the equation.

vat tax

Every year, travelers leave behind thousands of dollars worth of VAT tax behind in Europe that they technically can get refunded. Where is all this lost money and how did it get there? Let me explain.

VAT, or, the value added tax, is a European tax added to consumer goods on top of the retail price. This tax can range anywhere from 15-25% depending on the country and the individual store.

If a consumer is not a permanent resident of the EU — like an American traveler — they have the opportunity to apply for a refund of the VAT tax collected on their purchases. This only works for items that will be leaving the EU and used outside of Europe. The tax is not refundable on service purchases such as food, hotel costs, or taxi services.

The process for getting this money back is a bit tedious and can vary based on where the goods are purchased. But the overall process is generally the same.

A good rule of thumb is to have your passport with you. You will likely need to show your passport to prove you’re not an EU citizen to get the process going.

Make sure the store you’re shopping at offers the VAT refund. Not all retailers are required to participate in the refund program. However, most stores in tourist heavy areas will offer a VAT refund, and some will have signs indicating they are “tax-free.”

Before making your purchase, check with the merchant to see if there is a minimum purchase requirement in order to qualify for the refund. Some countries have no minimum (thanks, Ireland!) while others require up to the equivalent of $300 to qualify for a refund. Keep in mind this is a per-store total, not the sum total of all your purchases. If you really want the refund, it’s best to check before you get to the counter.

Once you’ve made your purchase, you will need to ask the merchant for the tax-free-form. Make sure the merchant fills out all the necessary fields before leaving, otherwise the form may be rejected. Some stores will mail in the refund form for you, but if not, make sure to tuck it, along with the receipt, somewhere safe so you know where to find it when you get to the airport.

When you’re ready to leave Europe, gather all of your tax-free-forms. If you’ve purchased items in multiple countries, you only need to stop at customs before you leave the continent — they’ll process all the forms at once. At the airport or port you’re leaving from, find the local customs booth with an export agent present. In smaller airports, it can be hard to find an export officer, so arrive early to ensure you have enough time to get your forms stamped and still make your flight. If you don’t get the stamps before you leave, you won’t get the refund.

The export agents may want to verify that the items you’re claiming a refund for are actually leaving the country, so make sure your purchases are accessible. If you pack them away in a checked bag, make sure to get your forms stamped before checking your luggage.

And remember, the refund is for exported goods only — meaning they are not to be used in the EU. If you show up to the airport wearing that fancy leather jacket you bought in Florence, chances are they won’t approve your refund.

You’ve found the export officer, your forms are stamped, you’re almost done. Some merchants work through a third party refund service that will give you your refund in cash right at the airport (with a service fee of course). The more common route is to mail in the stamped forms, either when you get back to the U.S. or more conveniently with a pre-paid, pre-addressed envelope provided for you at the customs station. Just drop it in the mailbox provided, then wait for the check.

The refund check can take anywhere from a few weeks to a few months to arrive at your permanent address. The check will be in a foreign currency, so there will most likely be a fee at your bank to cash or deposit it.

Unfortunately, even after all the paperwork and export-agent-searching, some people don’t ever receive their refund. After all that work, the check never comes, or there’s just not enough time to find the correct customs agent at the airport. Sometimes people leave with a pocket full of receipts and no stamps.

It’s up to you if you want to go through the tedium to apply for a VAT refund. Some may see the tax as an added cost to some great souvenirs, but others may view the refund as a down payment on the next adventure.