On a recent trip to Europe, I bought my first Miu Miu clutch bag. It was a beautiful purchase in an equally beautiful island off the Southern coast of Italy. What caught me by surprise, however, was the headache and hassle it took to get the refund on the VAT (value added tax) charged on the purchase. Even after going through all that, the amount I got back eventually was much less than I was expecting.
I can imagine how much more stressful it must be for those of us who make multiple luxury purchases all over Europe – an LV from Paris and a Chanel for good measure (a Hermès birkin anyone?), some Prada and Ferragamo from Italy and a Burberry from London. With VAT rates at 15-25% in Europe, tax refunds can add up to quite a tidy sum. Maybe sufficient to buy your next air tickets back to Europe.
So what are some tips to make this experience easier?
1. Get the paperwork done at the shop
Most luxury shops would be well-trained in this – ensure you get the right forms filled out and stamped by the shop where you made your purchase. The staff should guide you on all the fields that need to be filled in.
Shop in stores with VAT-refund schemes. You can usually see these stickers on their store windows or at the cash registers.
2. Find out which airport to claim your tax refunds
If you are going on a multi-country trip within the EU, you need to process your tax refunds at the departure airport of the last EU country you’re in. Don’t waste time (like I did), going to the tax refund office of the country where you bought your stuff and find out that isn’t the right place to be claiming your refunds.
Also do your research which are EU countries and which are not. For example, even though you don’t use the Euro in UK, it is an EU country. Switzerland and Norway for example, are non-EU countries.
3. You have to bring your purchases along and they have to be new
Bring your documents and purchases along to the airport. In order to claim tax refunds, your purchases have to be new (i.e. you cannot be wearing that new pair of shoes or have used the perfume you bought).
4. Expect a lot of difficulty locating the tax refund office at the airport and long queues
You’ll need to get the documents stamped at customs before collecting the tax refund. My experience was that the customs and tax refund offices are really difficult to locate. In some airports, they are one and the same office. In other airports, they are 2 separate offices. Also, there aren’t many signages to these offices, and they’re often times located in some obscure mezzanine level or tiny corner of the gargantuan airport.
Add in the language barrier in asking where it is, the luggages you’re carrying around with you, and the minutes ticking down to last check-in, and you have the recipe for a rather stressful experience at the end of that perfect holiday.
Also, when you finally get to the tax refund office, expect long snaking queues (think an hour and up) and don’t be surprised if you see tempers flaring. I witnessed an American tourist’s experience with a really rude and unhelpful staff. It probably spoilt her impression of friendly Italians. I saw some Chinese tourists with such a huge pile of receipts and an even larger pile of RMB cash refunds. I wouldn’t like to be behind them if there was just 1 tax refund counter.
After all, it isn’t a priority for the airport or your holiday country to help you get your money back. If you end up skipping this and donating your taxes to the country, all the better for the country you’re holidaying in!
5. Expect to get less refunds than the VAT charged
Don’t be surprised that refund that you eventually get back is quite a lot less than the taxes you paid on your purchases. If you opt to get your refund in cash, a commission is charged for the convenience. If you choose to get the refund in another currency than the one you purchased the item with, there will be further ‘losses’ due to foreign exchange conversions.
For me, I ended up getting back only slightly more than half of the taxes I paid and was expecting to be refunded.
It might have been cheaper and more convenient to go for credit card refund, however bear in mind processing usually takes about 2 billing cycles and there’s also the risk of not seeing your refunds at the end of the day.
6. Mail and other refund options
Tax refunds usually have a mail option. So if you’d like to save on the hassle at the airport, you can try asking the store where you made your purchases to mail in the documents for you. For very large purchases, try getting a tax refund on the spot at the store.
You can also get tax refunds at tourist offices (usually money changers) in the city centre of your holiday destination.
For both options though, you have to get the documents stamped at the airport customs and have the forms mailed back by the customs office, if not the refunds you received will be charged back to your credit card.
Sounds difficult? Yes, spending money on holiday is easy but getting money back isn’t! We hope these tips will help you lessen the pain of getting your tax refunds back and leave your holiday destination with a more pleasant experience. Follow Moneysmart on Facebook as we bring you more travel-related and personal finance tips.