I want to address one of the most common questions that comes to mind for people traveling abroad: “How do you shop with a tax refund (tax free shopping) while abroad?”
Nowadays, shopping abroad with a tax refund has become a reason for traveling in itself. I’ll share a bit about what tax-free shopping is and how it works, based on my own experiences.
What is tax-free shopping abroad?
Many countries around the world have specific tax rates set for goods and services sold. Residents of these countries are required to pay the tax determined by the government for the goods or services they purchase. This tax is known as the Value Added Tax (VAT).
However, individuals who do not live or reside in the country where they shop are not obligated to pay this tax. Therefore, when they are about to leave the country, they can declare that they are non-residents and claim a refund of the tax amount. This process is known as tax-free shopping.
What are the tax rates abroad?
As mentioned in the paragraph above, tax rates vary from country to country. Before traveling to your destination, I recommend researching the tax rates. I have added links where you can find VAT rates for countries worldwide and European countries. These links are updated annually to reflect the current rates. If you can’t find the VAT rates for your destination country in these links, simply searching “(country name) VAT rates” in a search engine should help you find the answer.
For a given country, you may encounter two different tax rates: standard VAT and reduced VAT. You might wonder which tax bracket the products you plan to purchase fall into. If you’re buying electronics, clothing, cosmetics, or similar items, I should mention that these typically fall under the standard VAT bracket, which is the higher rate. However, if you’re curious about which products fall under which tax bracket, you can easily find this information online by searching for country-specific tax brackets. For European countries, I’m sharing guides. When you click on the relevant country, the process is explained in detail.
How is the tax-free price of a product calculated?
The sales price of products you see in stores abroad is usually the price including tax. There are apps available online that can calculate the tax-free price of a product. Still, I would like to show you below how to calculate the tax-free price of a product using manual calculation.
Example for a product with a sales price of €500 and a 24% tax rate:
Using the example mentioned above, the tax-free price of a product sold for €500 in the store is €403.23. This means that you are actually paying €96.77 in tax when you buy the product. Later, when you leave the country, this tax is refunded to you. However, the agencies handling tax refunds at the point of sale may take significant deductions during the refund process. This means you might not receive the full amount of the tax back.You should know that. I have discussed this topic in detail below.
Tax Free Shopping Procedure and Remarkable Points
You must have your passport with you when shopping.
When entering, confirm whether the store you will be shopping at offers tax-free shopping.
Some older stores may not provide this service. Stores that provide this service usually have the phrase “tax free” written on their doors.
Pay attention to the minimum spending limit set by your country to get a tax refund.
If you are going to get a tax refund, make sure you spend more than the minimum limit. You won’t get a tax refund if you spend less than this limit. For example, the minimum spend limit is €50 for Germany and Greece, while it is €70 for Italy. These figures are for the price with tax. For example, you won’t get a tax refund for a purchase of €45 in Greece or €68 in Italy (don’t worry, it won’t be worth the trouble for the amount of tax you will get on that amount anyway).
Ask if the payment method is important for tax refundable purchases.
For an electronics purchase in Greece (store name: Plaisio), they stated that they can only refund tax on credit cards for purchases over €500, and cannot refund tax for cash payments. Make sure that the place you are going to shop at is compatible with the payment method you will use for tax refund purchases.
After making your purchase, make sure you get the necessary document for your tax refund.
After you shop, they will ask for your passport information. Based on this information, they will give you a document to get a tax refund, separate from the invoice. Keep the documents with you until you leave the country, you may need it. I have explained the different procedures I have done for tax refunds when leaving the airport in the rest of the article.
If you are going to get your refund from the airport, make sure to go early. Sometimes there can be long lines in front of customs and at the tax refund section.
Tax Refund Shopping Process
The process changes slightly depending on where and in which country you shop. I have compiled some scenarios that have happened to me for you. Frankly, this scenario might change for every country and place creates a challenging and uncertain situation. But since this is the reality, it would be beneficial for you to be prepared for different scenarios in advance.
First Scenario
The first scenario works by getting a tax refund by getting the tax refund document stamped at the customs office at the airport.
After you get your tax free document, when you come to the airport for your return, you find the customs department and get the tax free document given to you stamped. The document is approved by customs and you are ready to get your tax refund. Then, after passing through passport control (of course, don’t forget to give it and check in if you have luggage.) you can go to the counter of the relevant agent company’s desk and get a refund in cash or to your credit card. I am not sure if you get a cash refund for your purchases made with a credit card or a refund to your credit card for cash purchases.
Although I waited a short time for the stamp queue at customs, I then waited a long time to get my cash refund. Moreover, when you get your tax refund in cash, they deduct a few euros. In the scenario where you pay by credit card, it is enough to put the stamped document in an envelope and put it in the mailbox next to the counter without waiting in line. Moreover, your refund is not subject to any additional deductions.
In this scenario, it would be a good idea to get to the airport early if you are going to get a tax refund.
I should also mention how high the agents deduct from your tax refund. The tax on a €526 purchase is €101.8 (24%) in Greece, but the tax I got back is €63. So I’m talking about a 40% deduction. Also, since I received the refund in cash, an additional €6 was deducted and I received €57. For this reason, if you find a store that does not work with any tax free agents, you can choose that store. However, you need to get accurate information from the store about how the process works without an intermediary. Generally, after you have your document stamped at customs, you scan it and send it to the e-mail address provided by the company along with your bank account information. They deposit your tax to you without any deduction. I hope I come across to this scenario one day.
You can research the prices of the products you are considering purchasing in the country you are going to on the internet beforehand and compare them with the prices in your country of residence. Don’t forget to deduct the tax rate.
Second Scenario
The second scenario works by validating your departure at the airport and getting a refund to your credit card.
The second scenario I experienced was after I made a phone purchase with a credit card in Italy and a clothes purchase in Belgrade. This time, I downloaded the tax free agent’s application and became a member. From this application, you can see the purchases you made and the amount you paid.
When I went to Rome and Belgrade Airport, before going through passport control, I went to the counter of the relevant company and confirmed my exit from the country electronically this time. Then I entered my credit card information into the application on my phone. My credit card was refunded within a few days. The process was very easy, I didn’t even have to contact anyone. In fact, since it was the same company I used in Greece, I saw my old purchases on the application. Even now, I can see my old expenses by going into the application.
How do we know which scenario is valid?
If you ask how you learned and followed this whole process, you are asking a very good question. Usually, after you tell the place you shop that you want to get a tax free certificate, they explain the process to you or sometimes they give you brochures from the brokerage firm that explain the whole process in various languages. I benefited from both the sales consultants in the store and the brochures they gave me.
Let’s say they didn’t give you a brochure or didn’t explain what to do in the store and you don’t know what to do. In this case, you can go to an office of the tac free agent in the city and get information. All you need to do is get the document you need to shop tax free from the store.
To give an account of my shopping in Italy, since the VAT rate in Italy is 22%, €200 of my €1109 shopping was tax. After the intermediary company’s deduction, the amount I received was €131. After the approximately 40% deduction on my first shopping, this time I had a tax refund of approximately 35%.
I did not mention the name of the intermediary company that I mentioned throughout the article in order to avoid advertising, but I must say that it is a company that is widely used in many countries.
Conclusion
To sum up, tax free shopping is an easy and advantageous thing to do. Shopping abroad and getting a tax refund (no matter how much of a deduction) is quite profitable.
Based on my own experiences, I have listed the points you should pay attention to regarding the subject. It is important to have your passport with you while shopping. I will update this article as I shop with tax refunds in other countries and cities.
I hope this article was helpful for you. You can also write a comment to write about your experiences on this topic and ask any further questions you may have.
Also, if you want to reach us, you can write an e-mail, send a message on LinkedIn or Instagram. Don’t forget to follow our social media accounts! If you also have plans to go to the places I mentioned in the article, I recommend you to take a look at Rome City Guide and Athens City Guide. I separated the tastes and sightseeing of Athens. If you are a foodie like me, I also recommend you to take a look at the Athens Food Guide. The tastes of Rome are included in the Rome City Guide. Enjoy reading!
