This Travel Tip Can Help You Save Hundreds While Shopping Overseas

If you’re unfamiliar with VAT refunds, prepare to enjoy substantial savings the next time you shop internationally. If you’re on the hunt for a great deal on a luxury item, you could potentially save thousands by purchasing it abroad. (Discount luxury shopping: It’s not an oxymoron.) Here’s how you can maximize your savings with VAT.

What is VAT?

VAT—often redundantly referred to as VAT tax—stands for value-added tax. This tax applies to purchases made in the European Union, but more than 160 countries worldwide implement value-added taxation. It’s a sales tax imposed on consumers (not businesses) and is not present in the United States. Only visitors, including U.S. tourists, can qualify for a VAT refund.

Remember, VAT is typically included in the price of a product (so a €100 dress with a 20 percent VAT rate might be priced at €120). At times, it may be specified on the receipt. If you’re unsure, just ask a sales associate while you shop.

The VAT rate across Europe varies based on your destination and shopping location, ranging from 7.7 percent in Switzerland (which is not technically part of the E.U. and plans to raise its VAT to 8.1 percent in 2024) to 27 percent in Hungary. The average VAT rate in the E.U. is 21.3 percent, with a minimum of 15 percent. Deloitte offers a helpful country-specific breakdown.

However, rates can also differ based on the type of product you purchase. For instance, food and medicines are usually taxed at a lower rate compared to leather goods like shoes and bags.

Is it possible to claim a VAT refund in the U.K.?

It depends: Travelers could claim VAT refunds across the U.K. until December 31, 2020, but Brexit ended this practice. Currently, the only place in the region where overseas visitors can obtain VAT refunds is Northern Ireland.

What items are eligible for a refund?

Nearly all luxury items—including apparel, footwear, cosmetics and skincare products, jewelry, handbags, leather goods, and artwork—are subject to value-added tax. While many products qualify for a VAT refund, it’s essential to remember that only brand new items (not second-hand) can be claimed. Each purchase must also exceed a specific threshold, which varies by country. For example, in France, you need to spend over €100 per transaction to qualify for a VAT refund. This means you can buy multiple items in one store totaling more than €100, but if you purchase the same items across different stores, you won’t be able to claim the refund. You can also make one large purchase over €100 at various stores and claim for each transaction separately.

Your items should ideally be unused when you declare them. However, it’s usually acceptable to have used your new handbag or coat. Just be cautious about wearing those new leather shoes before presenting them to customs. Additionally, ensure that the items you declare are recent purchases, as you must submit your claim within three months of leaving the European Union.

Items that do not qualify for a VAT refund

• Vintage items—Those vintage Chanel clip-on earrings you picked up at the Marché aux Puces de Saint-Ouen? The (likely very good) price you paid is final. No refunds are available.
• Goods bought in tax-free airport zones—since there’s nothing to refund here.
• Transactions that do not meet the minimum threshold
• Services—such as hotel accommodations, meals at restaurants, and tour guide fees—because these are experienced abroad and not taken home.
• Anything you aren’t bringing back to the United States. The items must return with you.
• Cars—unless the vehicle is solely for business use, in which case you can receive up to 50 percent back on your VAT.
• Alcohol and tobacco
• Counterfeit items—This might seem obvious, but a fake Dior tote does not qualify for VAT (and in France, buying a counterfeit is a criminal offense).

What to keep in mind while shopping

• Ensure you have your passport handy before shopping—you’ll need to provide proof of your visitor status. If you’re shopping specifically to take advantage of discounts, check with the store if they offer VAT refunds and what the purchase-amount threshold is. Smaller shops and boutiques sometimes do not participate, so it’s best to confirm before you start shopping.
• Request paperwork at every store you visit—the sales assistant, cashier, or store manager should provide this information. Sometimes, stores can process a refund for you on the spot (known as “instant refund”), but most use services like Global Blue, Premier TaxFree, or other third parties to manage the refund process. [Author’s note: I visited some of the largest stores in Paris—Le Bon Marché, Liberty, Louis Vuitton, Chanel—and was unable to secure an instant refund at any of them.]
• Don’t leave the store without official, signed documents. Many department stores have a VAT office, such as Galeries Lafayette Haussmann in Paris. These offices can assist you with your paperwork. Attach your receipts to your forms and store them securely so you can access them when claiming your refund.
• Request a second receipt. You might need this for U.S. customs when you return home.
• Try to consolidate purchases at boutiques into a single transaction to potentially receive a higher refund rate. Don’t buy a bag at Hermès and return later for a scarf; if possible, purchase both at the same time.

How to retrieve your refund

When you’re about to leave the E.U.—your last port of departure—ensure you have your items ready for declaration and all your paperwork completed, then arrive at the airport well ahead of your flight. Remember, if you’re traveling across various European countries, you won’t need to go through this process each time you leave one place for another within the continent (even if your next stop is a non-E.U. country like Norway or Switzerland).

The refund procedure is finalized upon your last departure when heading home. Your forms should include instructions on the necessary steps (and locations), but here’s a brief overview of what to do.

• Locate a VAT counter. It's best to identify your options before your flight to make the process smoother on travel day—Moneycorp, Planet, and Global Blue are quite popular. Check your specific airport's website for detailed information; some may offer particular instructions tailored to their location.
• Some airports might provide a dropbox if no staff are available to process your paperwork. This is relatively uncommon, but you may encounter a scenario where there’s no one at the counter. Look for a drop box to submit your completed paperwork. The downside is that this can delay the process if any details are incorrect or missing, so double-check everything before dropping it off.
• At the counter, present your filled-out forms along with your passport and boarding pass to the attendant. You may need to show certain items, especially if they exceed €1,000. If you have a large purchase, you’ll likely be directed to the local customs office for an officer to inspect your goods and provide a customs stamp. If not, an employee will stamp your documents at the refund counter and either mail them or hand them back to you to drop in a mailbox.
• Select your preferred refund method. You can receive your refund in cash or as a direct credit to your credit card. Cash refunds are quicker but often come with a higher fee. Credit card refunds may take longer but usually yield a better amount. Sometimes refunds are processed instantly, while others can take up to five days or even months. Keep your paperwork handy in case you need to track your refund. If you haven’t received any updates in six weeks, it’s time to reach out to the agency.

Now for the less exciting news: You do not receive the entire 15–20 percent VAT refunded. There are unavoidable processing fees that unfortunately reduce the final refund amount, but typically this is a minor charge. You can get an estimate on the Global Blue website for what your refund might look like.

How this impacts your return trip

• Plan to allocate at least two extra hours to your travel schedule when declaring your items at an airport VAT counter.
• Repack your items into your checked luggage after submitting them for your refund.
• Furthermore, you must declare your items upon returning to the United States, and a customs officer may request to see your purchases if they exceed $800. You might also need to pay duty based on your purchase value and the number of people in your party. The first $800 (per individual) is duty-free, the next $1,000 is taxed at 3 percent, and any amount beyond that is subject to varying rates.

Can I simply shop at the duty-free stores in the airport?

Yes, but usually the discounts on products are only marginal compared to what you would find outside the terminal. You’ll save more if you take advantage of the VAT refund process.

How to optimize your VAT savings

You might think this seems like too much hassle for a small return, and sometimes you’re right—it can be a lot of work for minimal gain. To truly maximize your VAT refund, focus on larger purchases such as luxury items or buying multiple items from a single store.

• Purchase items made in the country you’re visiting. Buying a Louis Vuitton bag in France can save you a considerable amount compared to purchasing the same bag in the U.S.
• Travel with family members. In the U.S., you can bring in $800 of duty-free goods per person. So, if you travel with a family of four, that totals $3,200 of tax-free imports.
• Don't attempt to evade U.S. customs tax authorities if your purchase exceeds $800. This constitutes tax fraud, which can lead to significant penalties and loss of Global Entry privileges. Your VAT refund is linked to your passport number, so it’s best to comply with the process.
• Pay in euros or use a credit card without foreign transaction fees to avoid unnecessary costs.

Some travelers have successfully saved a lot on luxury goods, while others have had less luck even after meticulously following all guidelines. However, if you’ve spent significantly on souvenirs in Europe, it’s worth attempting to reclaim that VAT to offset the duties you’ll incur in the U.S.

Is there a way to bypass paying VAT?

In theory, yes. If a retailer provides home shipping services, you could have your purchase sent directly to your home (saving valuable packing space!). In this case, the store will not charge you VAT. However, there’s a catch: you will need to cover the freight shipping costs, which can add up quickly. So, consider the pros and cons carefully—what shipping cost would make it worth the hassle of dealing with VAT refund paperwork?

This article first appeared online in 2020 and was last updated on February 2, 2024, by Erika Owen to reflect the latest information.