EU Tax Refunds: Save Money on Shopping in Europe

As the cost of everything continues to rise, many travellers are looking for ways to reduce costs on their trips. While earning and redeeming points is one of the best ways to minimize costs, there are other useful methods to be aware of, too.

Many countries offer a rebate on taxes paid for goods and services, whereby tourists can be refunded some of the taxes paid during their trip. Each program has a number of inclusion and exclusion criteria, and people who make large purchases tend to benefit most.

In this post, let’s have a look at the European Union’s tax refund program, which is known as the VAT refund. Specifically, we’ll look at what a VAT refund is, eligibility criteria, and how to submit claims to get back some of your money on your next trip to Europe.

What Is a VAT Refund?

Value Added Tax (VAT) is similar to the sales tax that you’d find when shopping in North America. It’s a tax added onto purchased goods and services, and is used instead of sales tax in many parts of the world, including in the European Union.

While VAT is similar to sales tax, the amounts tend to be significantly higher in the EU, with the standard VAT ranging from a low 17% in Luxembourg to a high of 27% in Hungary.

Although these are the standard VAT rates, some items may have a lower VAT rate, as countries can choose to offer a reduced VAT rate on certain items.

In general, European countries offer tax refunds to encourage tourists to visit and spend money, thus helping to boost their economy.

In the European Union, exports are exempt from VAT. Purchases by foreigners in the EU are considered to be exports, as long as you’re actually taking the items outside of the EU.

It’s important to know that unlike sticker prices in North America, which typically exclude sales tax, European prices include VAT. So, while the VAT may be 17–27%, you won’t receive a refund of 17–27% of the total purchase, but rather on the base amount before the tax is applied.

For example, if you buy a VAT refund-eligible item for $1,000 in Hungary, with 27% VAT already factored in, you’ll actually be paying $787.40 before tax. Thus, you’re eligible to receive a VAT refund of $212.60, which is 27% of the base price of $787.40.

As you can see, depending on the amount of your purchase and the EU country in which your purchase was made, it can absolutely be worth your…