If you haven’t traveled abroad yet, you probably aren’t aware of what the tax-free system is. This system allows getting part of the money you spent in a foreign country back. It is because foreign citizens are exempted from paying VAT. Let’s find out the details of possible ways to save money on your holiday shopping.
What Is Tax Free and How Does It Work?
About 130 countries in the world charge VAT. It can be from 5% to 30%. But only about 50 countries out of these 130 provide tax free system, in other words, exempt foreign citizens from paying VAT. Why?
As a foreign citizen (usually it is a person on a business trip or on holiday) doesn’t live in the country, then he isn’t obliged to pay taxes. He pays taxes in his country of residence. This is why he gets the VAT back. It is quite fair.
When Can I Get Tax Free?
It would be a mistake to think that you could get the VAT back for any purchases made on the territory of a foreign country. There are some limitations – for example, not all countries return the tax for food. In general, tax free system applies for articles of personal use: clothes and shoes, electronics, jewelry. You can get tax free for shopping in large supermarkets.
There are some more details you have to pay attention to:
- In some countries there is a minimum sum that the tax free can be applied to (for example, in Finland it is 40 EUR);
- You can’t get tax free for visiting bars and restaurants;
- Small shops and tourist markets rarely rake part in the tax free system;
- A part of the returned money will be charged by the intermediary company.
What are the intermediary companies and is it possible to get tax free without them?
Intermediaries in the World of Tax Free
To prepare the papers and return the tax, you need to contact the intermediary company. It is impossible to return the tax without such cooperation as contacting the tax offices directly is too long and difficult.
The most popular companies are:
Innova Taxfree
Global Blue
Premier Tax Free
These companies have contracts with large stores, shopping malls and brands to make the procedure of returning money easier.
To make sure the store takes part in the tax free system, pay attention to the stickers on the doors: you will see the logo of one of the intermediary companies. If there is no such a sticker, ask the shop assistant or the administration of the mall.
What Are the Tax Free Rates in Different Countries?
In all European and some Asian countries there is a tax free system. Every country has its own rates and limits. Information is updated every year.
Tax Free in Europe and Scandinavia in 2019
| Country | Max tax | Min receipt amount |
|---|---|---|
| Austria | 20% | 75,01 € |
| Belarus | 20% | 80 BYN |
| Belgium | 21% | |
| Bulgaria | 20% | 100 leva |
| Great Britain | 20% | 25 £ |
| Hungary | 27% | |
| Germany | 19% | 25 € |
| Holland | 21% | 50 € |
| Greece | 23% | |
| Denmark | 25% | |
| Ireland | 23% | |
| Iceland | 24% | |
| Spain | 21% | |
| Italy | 22% | 155 € |
| Cyprus | 19% | |
| Latvia | 21% | |
| Lithuania | 21% | |
| Luxembourg | 17% | |
| Norway | 25% | |
| Poland | 23% | 200 zlotys |
| Portugal | 23% | |
| Slovakia | 20% | |
| Slovenia | 22% | |
| Finland | 24% | 40 € |
| France | 20% | 175,01 € |
| Croatia | 25% | |
| Czech | 21%/15% | 2001 CZK |
| Switzerland | 8%/2,5-3,8% | 300 CHF |
| Sweden | 25%/0-12% | |
| Estonia | 20%/9% | 38 € |
Asian and Other Countries Rates
| Country | Max tax | Min receipt amount |
|---|---|---|
| Australia | 14,5% | 300 AUS |
| Morocco | 20% | 2 000 dirham |
| Israel | 15,5% | 400 shekels |
| Thailand | 10% | 2 000 baht |
| Turkey | 18% | |
| Singapore | 7% | 100 SGD |
NB: for some products, there is a decreased VAT so you will get a little less than it is indicated in the table.
How to Prepare the Documents for Tax Free
The beginning of the preparation process starts at the cashier desk. If you know that a certain store takes part in the tax free system, ask the cashier to fill in the special form. The following information must be specified:
- Your passport information and your postal address in the country of residence;
- Amount and date of the purchase;
- Amount of the return;
- The list of purchases;
- The stamp of the store and the cashier’s signature.
You must save the receipt until you leave the country. It’s better not to unpack the purchases and to save the branded packet of the store.
The next step is getting the stamp to your form at the customs. You can do it whether at the airport or the border. Go to the Tax Free office desk and provide your purchases together with the receipt and the form. You will get the stamp after the check. Now you can get your money back. However, sometimes you have to wait.
Important: the receipt and the stamp have expiration dates. Sometimes they differ. On average, the expiration term is 3 months but in some countries (Morocco and Norway) they expire in a month. So don’t postpone the procedure.
How to Return Money with Tax Free System?
So you have prepared all the papers and now want to get your money back. There are several ways but each of them has some details (such as fees).
- In some cases, VAT can be returned right at the cashier desk but you still have to prepare the papers. Otherwise, you will be charged the money.
- You can get the money to a card or have it deposited to your bank card at the airport if there is a Tax Refund desk. You will be charged a fee for getting cash (the amount depends on the country).
- The most popular way is to send the documents to the intermediary’s office, specify your bank card number and wait for the return. Usually, it takes about 2 months. You can send the letter from the airport in case there are special ballots or from any post office in your country. The company’s address is specified on the form.
- Get money in the bank. Use the one that cooperates with the intermediary company. The bank might charge the fees and it will hold a conversion rate fee.
Make sure which categories don’t take part in the tax free system right at the store. It’s worth checking what products participate in the tax free system and what rates there are.
Shopping abroad may be very exciting but expensive at times. Now as you know everything about tax free, you can count all your expenses and save up to 25%. Have good holidays and pleasant shopping abroad!
Don’t forget to buy online with cashback when on a trip or buying right from your home!
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