How To Reclaim Taxes Paid Abroad

Travelers can get reimbursed for many of the taxes they pay while abroad by filling out the necessary paperwork and showing it at customs on the way out. Depending on where you’re visiting, even nonbusiness persons can reclaim most if not all taxes on goods purchased.

Most countries charge taxes on the various stages of production of a product, known as Value Added Tax (VAT). Similar to sales tax in the US, VAT generally increases the prices of goods by 15-25%. (In Canada, it’s known as the Goods and Service Tax, GST; roughly 7%.)

Travel Tax has detailed information on VAT refunds and I’ve summed up the basics for your next trip.

Which Countries Refund VAT?

All of these countries refund some or all of VATs paid by foreigners.

• Africa: South Africa
• Asia: Japan
• Europe: All of the European Community (EC) nations. Those are Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Monaco, Netherlands, Portugal, Spain, Sweden, and the United Kingdom.
  • Croatia
  • Czech Republic
  • Estonia
  • Hungary
  • Iceland
  • Lichtenstein
  • Noway
  • Slovenia
  • Switzerland
  • Turkey

What Taxes Are Eligible For Refunds?

Tourists may apply for refunds on all goods purchased, but not any services rendered. Customs officials are required to verify that the goods purchased will actually be leaving the country (generally not a problem at the airport). Business travelers are not subject to the same verification process and may claim a variety of services rendered, including most purchased goods. Tourists must fill out their own refund paperwork (keep you receipts) whereas businesses do it on the behalf of the worker after the trip.

How Can You Apply For A VAT Refund

This varies from country to country but for tourists usually you fill out some paperwork at the time of purchase. Ask about VAT refunds for any purchases made over the equivalent of $15. Keep your receipts and all of these forms, you will have to present them to customs officials upon departure. Arrive at the airport at least 1-2 hours early to ensure you have enough time to make your flight.

Travelers in Europe may be able to participate in the Tax-free Shopping Program. Many stores that participate (usually the major tourist areas) will have signs at near the registers . Show your passport and you won’t be charged and VAT, saving you the effort of filling out a form. Remember that most countries have minimum purchase requirements to apply for VAT reclaims so make sure you’ve reached this limit before tax-free shopping. You may miss out on VAT reclaims (up to $340 in Switzerland for example).

Business travelers (or big spenders) should contact one of these VAT recovery companies.

Conclusion

Filling out VAT forms, arriving to the airport even earlier, and hanging around customs is generally worth the effort especially if you’re traveling on a weak dollar. The money saved can be used to fund your next trip and should be included in any simple vacation budget. Some quick Google hacking or embassy website will have the limits, rules, and other VAT reclaim information you’ll need.

[photo by: curious_spider]