Shopping Abroad: Everything You Need to Know about VAT and Saving When You Shop

If you’re looking to make a big shopping purchase and planning on traveling abroad around the same time, you’re in luck! If you haven’t heard of VAT before, you’ll want to keep reading. We’ll get into what it is, where it applies, and how to get sometimes huge refunds on purchases made abroad. For those of you that aren’t familiar with VAT, it stands for “value-added tax” and is a general tax that is added to goods and services in certain countries, most notably in the European Union.

Essentially, this tax is added to the price of a good when you buy it, and you are able to get it back as a refund if you follow a particular process. The percentage of tax added varies by country. You can find a full list of countries where you can get a VAT refund here. As an American citizen, this is most often utilized when shopping in Europe. Particularly when purchasing luxury goods.

Tips for Shopping Abroad and Claiming Your VAT Refund

+ Purchasing luxury goods abroad and claiming a VAT refund can make a huge difference in price. Be sure to do your research in advance. Look up the price of items you’re interested in at home and abroad. Some brands keep their pricing relatively consistent across various exchange rates, but certain brands still have fairly large price discrepancies based on where you buy the item!

For example, luxury handbags such as Louis Vuitton and Chanel can run for up to $1k less if you buy them abroad (VAT refund in Europe is typically between 12-15%)! As a general rule of thumb, designers are often cheaper in their original country. Shop for Louis Vuitton, Celine, Saint Laurent, Chanel, etc. in Paris, and browse Gucci, Prada, and Missoni in Italy. (I can verify that Missoni in Italy is SO much cheaper than it is in the US. I honestly was so sad I didn’t have more room in my suitcase to bring home all the insane home decor back with me).

At the same time, try not to impulse buy just because you’re abroad and may be getting 12% back. It can be tough to resist temptation, but you’ll be much happier if you splurge on a wishlist item you’ve been dreaming of for a while.

+ Always use a credit card without foreign transaction fees:

You don’t want to save money abroad only to pay some of it back in credit card fees.

+ In a similar vain, it’s always best practice to choose the local currency:

You’ll get a better exchange rate than if you elect to buy items in your home currency.

+ Follow the VAT process closely! This is important:

You don’t just automatically get the tax back when you leave the EU. You have to make sure you get the proper paperwork filled out when you purchase your item and then file it correctly when you leave. Otherwise you won’t get your refund. The process can be a little tricky if you aren’t familiar, but as long as you follow the instructions it should be fairly straight forward.

First, make sure you get the appropriate paperwork. Most luxury stores will take care of this for you. You’ll just need your passport when you make your purchase. Make sure you keep each individual receipt and corresponding paperwork organized.

On the day you leave the EU, you will need to file the paperwork at the last stop (country) before you exit.

Every airport is different, but they will have different counters for you to file your VAT paperwork. Be sure to allot sufficient time for this process. Lines can be extremely long, and the last thing you want is to miss filing your paperwork because you ran out of time. The counters can be before or after security. Look online before you go. It’s best to keep expensive items in your carry on anyway, but make sure you have the items on you when you go to the counter. Sometimes they will ask to see the items and make sure they are new.

Also, different stores process VAT refunds through different vendors, so you may need to account for going to different counters to file paperwork. The two big ones are Global Blue and Premier Tax Free. The counters will stamp your envelopes and then you will select your preferred method of payment. You can choose to get cash (Euros) on the spot or wait for the refund to process on your credit card (this can take 2-3 months).

If you elect to get cash back, you’ll get a little less back than if you wait for the refund on your card. I’ve read stories online of people having terrible experiences with getting their VAT refund back, so if you prefer to get it done then and there and have peace of mind, you may want to get cash back. Then you need to make sure you actually mail the envelopes so they can be formally processed.

Happy shopping! xx

sweater: nation ltd | belt: b-low the belt | denim: hudson | shoes: matisse | bag: similar