British citizens can now shop tax-free in Europe!
While Brexit might have complicated the travel requirements for 60 plus million Brits that typically visit the EU each year, it has also created one unexpected perk. The Retail Export Scheme (RES), or simply tax-free shopping, is a Europe-wide scheme designed to boost tourism. British citizens visiting popular destinations, such as Italy, France, and Spain, can now enjoy an effective discount on their shopping by getting a VAT refund. So next time you plan a city break to Paris or Rome, make sure to take a bigger suitcase to pack all those holiday bargains!
How does tax-free shopping in the EU work
Although there are some variations on the procedure of claiming a VAT refund in different EU countries the basic principles are the same. Here are the main rules to consider:
- You must be a non-EU resident, which all Brits are. Although note that the residents of Northern Ireland are excluded from the VAT refund scheme in the EU by the Northern Ireland Brexit Protocol. Hence, as far as tax-free shopping is concerned, even though the whole of the UK left the EU, only residents of Great Britain (England, Wales, and Scotland) are eligible.
- You must be visiting only temporarily while on holiday or business. Some countries even have a limitation for the total length of visit. For example, in France it is a maximum of 6 months.
- Not all purchases are eligible for a tax refund. A simple rule of thumb is that you must be able to put the tax-free goods in your luggage and, if requested, show them to a Customs officer before departure. So personal items such as clothes, portable electronics, cosmetics, jewellery all pass this test. Whereas, services, e.g. transport or event tickets, hotels or restaurant bills do not qualify as they will have already been “consumed” before your departure.
- Before making a tax-free purchase, check with the store if they participate in the VAT refund scheme, or alternatively if they can issue the required documentation to you. Good news is that most large retailers offer the service via their affiliated tax refund agent, or will issue an invoice, which would allow you to complete the procedure via digital services, such as the Airvat tax refund app.
- No customs stamp, no refund! Before your departure day, find out where and how to get your tax refund form authorised. Typically, this involves going to the customs desk at the airport to obtain a stamp. In countries with a digital customs system, such as France and Spain, you can do a quick self-validation at an electronic terminal. Also make sure that your shopping is still unused and is in its original packaging before your departure in case you are asked to show the items for inspection. Opened perfume bottles or chocolate boxes will not pass!
- Only after your VAT refund claim has been successfully validated will you be able to get the VAT paid into your bank account. This can take around 1-4 weeks depending on which refund agent you used and the local procedure. In countries with a digital system, such as France, Italy, and Spain, the actual refund payment can be received much faster, usually within a few days after departure. It is also often possible to get a quick cash refund still at the airport, however, we advise against this as you would lose 10-15% in extra fees and poor exchange rates.
Do I have to pay a commission when getting a VAT refund
Yes, do not expect to receive the full amount of VAT back. The tax refund agent who processes the claim will typically charge 20-50% admin fee (I know what you are thinking... it can be a total rip off, make sure to carefully read the small print of your provider!). Typically refund operators that have direct partnerships with retailers, such as Global Blue and Planet Tax Free, would charge a much higher commission of 30-50%. New generation of digital refund agents operating via mobile apps, such as Airvat, are a much better deal at around 20%. Read more here on how to calculate your VAT refund in France, Italy, Spain, and the UK.
Tax-free shopping vs online shopping from abroad
Tax-free shopping is usually better value than ordering the same items online from abroad. When purchasing items online from abroad and getting them delivered to the UK, typically any foreign VAT deduction tends to be offset by the shipping cost.
Also online shopping from overseas attracts UK import duty and tax for purchase values above £135, inclusive of the courier cost. This is a much lower threshold than the tax and duty free allowance for bringing goods back to the UK in your personal language, which stands at £390 and does not involve any shipping costs.
So, in short, it makes more financial sense to shop tax-free while on holiday abroad then purchase the same items online. Plus there is the added benefit of being able to try on your items in person instead of dealing with online returns and unexpected surprises when opening courier boxes.
What are the VAT rates in the EU
In Europe, depending on the individual country the standard VAT rate ranges between 8% and 27% and is already included in the final sale price. The standard VAT rate refers to the most common rate applied on goods in each country. This is also the relevant tax percentage for when you calculate a VAT refund as it would usually apply on the most popular tax-free shopping items. Learn more here on how to calculate your VAT refund.
Minimum purchase requirements for tax-free shopping
Some European countries also have a minimum purchase requirement to qualify for a VAT refund. See the table below to find out what this amount is for your destination country so that you can plan ahead to group items together into a larger purchase in order to qualify for a refund.
|VAT Rates and Minimum Purchases Amount
|Country of Purchase
|VAT Standard Rate
|Minimum Amount per Invoice
|Northern Ireland (UK)