Value Added Tax Refund (VAT) for Vacation Shopping

by David Ning · 21 comments

Many travel to different countries around the year but few take advantage of the sales tax refund policies that some countries provide.  The most common reasons for not applying are:

  1. never knew tax refund are possible for visitors
  2. didn’t know how to get your tax refunds back
  3. laziness

If you fall under any of the following, this article is for you.

Why Countries Allow Sales Tax Refunds for Visitors

The reason is simple – visitor attraction.  Countries want you to spend, spend and spend when you are visiting, so offering a tax refund works the same way as someone putting a sign that says “Big Discount”.  Whether this tactic works or not is a different debate because so many people never bother with this but if you care about your money and finances, there is no reason not to take advantage and leave money on the table.

How to Get Your Money Back

Most countries have different procedures of applying for tax refunds as well as which part of the sales tax can be refunded.  However, the general procedure consists of:

  1. Filling out some type of form
  2. Bringing your passport
  3. Proof that you are a visitor – some form of boarding pass or itinerary etc

Easiest Way to Get Tax Refunds Back

Sometimes, shoppers can sweet talk the store into not charging the sales tax in the first place, but this method usually doesn’t work for larger retailers.  Many department stores have a semi-convenient way to getting tax refunds back via their customer service section.  Whenever you shop, the cashier can usually tell you where to go.  For example, Holt Renfrew had a customer service department that will refund all applicable sales tax back if you show them your receipt, boarding pass as well as your passport.  If all else fails, you can usually find a tax refund form by googling “country sales tax refund” and applying for it by mail.  Just make sure to search as soon as possible as most countries will need some sort of approval via an official stamp from an authorized personnel (read – get it figured out before you leave the country).

Countries Participating

There are hundreds of countries that have their own version of the sales tax refund program, here are a few in more detail.

  1. Canada – Visitors are allowed to get the provincial sales tax (PST) portion of the purchase back, with the tax being a minimum of $50 CDN per purchase.
  2. Japan – Visitors who spend more than 10,001 yen on any given day are allowed to get the 5% sales tax refunded.
  3. Taiwan – Receipts showing a spending of NT$3,000 on any single day.
  4. United Kingdom – European countries call it VAT (value added taxes).  UK’s VAT is currently at 17.5% with the minimum amount £30 GBP to qualify.

Some Additional Tips for Getting Your Tax Refund

Many people give up on sales taxes because it could be rather complicated to get money back.  To help you succeed, here are some more tips to remember.

  1. Shop at Stores that Embraces the Program – Not every store will know everything about tax refunds, so it makes sense to ask before you make a big purchase when traveling aboard.  With taxes as high as 25% in some countries, it would be a shame to not being able to get the refund back.
  2. Get the Necessary Documents – Most stores that are familiar with tax refund programs have the necessary forms in-store.  If possible, ask the customer service representative to help you fill out the form.  Otherwise, fill it out as much as possible yourself and ask all questions you have.
  3. Give Yourself Ample Time – The official stamp (if needed) are usually given by customs at border crossings and can take time to line up and get processed.  Don’t short change yourself by thinking that you can just get it done within 5 minutes.
  4. Bring the Product – Some countries require you to bring the purchased item to get the stamp, while others will tell you that it’s unnecessary.  Some officers will even require the item to be unused and in brand new condition, so don’t wear it believing you can just show the officer.  Since there are discrepancies from country to country on this rule and they are ever changing, bring the item with you unused.
  5. Getting the Refund – Once you get your stamp, it’s time to mail the form to the address provided.  The process could sometimes take months with more variables so I always try to see if there’s a way to get the refund immediately.  Some countries / stores allow you to get the refund right then and there, while others use a third party service where they will charge you a processing fee for servicing your refund.
  6. The Government is Involved After All – Even with all the procedures and documents, the refund might not come.  There were reports that some people have all the documents ready but just couldn’t find the customs personnel at the airport, while others claim that they mailed the form but didn’t receive any reply.  That’s why even if there’s a service fee to get the refund right away, it’s a good idea to always take advantage of it.

Is It Really Worth It

It’s complicated and worst of all, you might not even get any money back even if you follow all the rules.  However, not even trying is like saying no to a company match in our 401k plans.  If there’s even a slight chance of getting money returned, I strongly urge you to give this shot.  At the very least, ask the cashier about it when you buy something while traveling.  It might turn out that it’s as easy as going to the customer service representative and talking to them.

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{ 21 comments… read them below or add one }

Craig December 24, 2008 at 8:55 am

Very informative post. I have heard of it in the past, but have never taken part when traveling. To be honest it sounds like a lot of effort just to hopefully receive a few bucks back down the road. Is the time worth it?

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MoneyNing December 24, 2008 at 9:01 am

Craig: Whether it’s a hassle or not largely depends on the actual country and merchant that you buy from. It really doesn’t hurt to ask though when you buy something since some of the larger department stores allow you to get your money back right then and there.

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Craig December 24, 2008 at 9:05 am

MoneyNing: You’re right, never hurts to ask. If you can get the money straight back there, or have them take off the sales tax right away, that would be great. Otherwise, seems like a hassle. How do they handle the taxes in countries that there really is no sales tax? For example in Europe everything is already included, you pay exactly what you see on the price tag. Is there something different set up for those countries?

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MoneyNing December 24, 2008 at 12:18 pm

Craig: I haven’t tried this in Europe but I’ve heard that countries like the UK has as much as 17.5% as tax. When you are at the border, you can get it stamped and refunded provided that you have the product and receipt with you.

It may be a hassle but if you buy something for like $1000 for example, getting $175 back is definitely worth the time. Before you go to an European country, you can probably search the web and find out what the percentage of VAT is there. Doing a little planning and homework will probably save you time and hassle too.

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Craig December 24, 2008 at 12:20 pm

@Pinyo thanks, if someone is going to spend that type of money, you are right, then it is worth it. My travel experience is mainly through backpacking so my purchases and presents to others were very small. Good thing to look into though the next time I travel.

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Craig December 24, 2008 at 12:21 pm

I meant @MoneyNing: Sorry about that.

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Robert December 25, 2008 at 5:00 am

@moneyning The VAT rate in the UK is currently 15%, due to return to 17.5% on 1 January 2010. This is not the highest rate of VAT in Europe. Denmark has a 25% rate.

Also, the price you pay includes the VAT, so in your example of paying 1000 you’d only get about 150 back – currently less, about 130, because of the lower rate of VAT in the UK. The same thing in Denmark would get you a refund of about 200.

In Europe it is necessary to get the forms stamped by Customs as you leave to return to your home country, and send them back to the retailer who needs them to support not charging/refunding the VAT.

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PennySeeds.com December 25, 2008 at 6:57 am

This is a pretty interesting post. Any idea if this works on all purchases made in other countries or just goods?

For example; If you could apply this method to things like hotel stays, cab fees, resturants, ect. you could save a lot of cash pretty fast.

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Jerry December 25, 2008 at 9:23 am

Don’t forget that you can save on sales tax within the US, as well. If you happen to visit Oregon on New Hampshire, neither of those states charge a sales tax. (In fact, New Hampshire doesn’t even have a state income tax.) This leads to some nice insurance that they will save money for people who live (or just shop) there. Aside from that, they are both lovely places to visit.
Jerry

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MoneyNing December 25, 2008 at 2:27 pm

Robert: Thanks for the explanation and correction. My quick math is not as accurate as when I was younger anymore :) It seems like every country has their own rules of how tax refunds are done but if you can take advantage of it, you definitely should.

PennySeeds: As I understand it, tourist are not able to deduct services such as hotel stays but if you are there on business, all the taxes from business expenses are deductible.

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carnation December 27, 2008 at 3:35 am

i was told that when i went to visit canada but i never did process it. anyway i did not make any large purchases but they were sure more than CAD50. i did not know you can do this in the UK. i could have gotten a refund there. Thailand also has VAT refunds for purchases of 2,000 baht up. i haven’t done this as well but there are details when you google about it. some malls will give you the forms but most you can claim at the airport but you have to show the item you bought as well. it’s true too much hassle.

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Associate Money December 27, 2008 at 5:36 am

Shucks, this post has come a bit late for me. I recently came back from a business trip in Canada bearing lots of gifts for friends. Should have asked the sales staff to take out the sales tax then.

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CarInsuranceQuote.net May 13, 2009 at 2:13 pm

I came back from Canada and just a few months before they had gotten rid of the VAT tax rebate. To make matters worse, we went when the dollar was equal to the Canadian dollar. They didn’t even want our money because they thought our economy was going in the dumps. Now it’s their dollar that is slipping. Writing about it makes me want to drive up there again.

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Alma August 5, 2010 at 7:36 am

A friend of mine went to Canada, she forgot to take her receipts to the duty free station before leaving Canada. Where can she request the form so she can get her tax money back from Canada?

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Roxanne September 4, 2010 at 6:36 pm

I had 6 envelopes prepared for the Customs Office in my suitcase and discovered them when I arrived home.
Is there anything I can do? I wrote one of the companies an email and they said you absolutely need to get the papers stamped.
I went to the French Consulate who can provide a stamp, but requires $23. per envelope and does not guarantee the tax will be paid.
Can you suggest anything. Thank you.

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B July 28, 2011 at 8:56 am

July 28, 2011
i didn’t fly to canada i drove to canada and i’m home now and have all my reciepts is their anyway i can have a form sent to me in the US

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Laura October 3, 2012 at 1:53 pm

Hi, I am new to your site and already I LOVE it! I was very happy to read this post just now. I am about to go out the country for dental work and even though I do kind of remember over hearing or reading something about this type of thing before, I never took advantage of it. I’ve only been out the Country twice before and it never even crossed my mind, I know if you knew the title of my website you would laugh. :(~ “No I am not blonde, lol kidding..”
So, thank you for posting this, I think you may of saved me some money, I sure hope so! I truly wouldn’t of even thought of this without reading your post. I WILL be looking into this and seeing what I can maybe get money back on. I know here in the states we can claim medical, but I never thought about out of the country. Do you know the answer? I’ll start looking into it, but I just thought maybe you may already know something about it. I live in the United States and will be traveling to Costa Rica.
Even if I am not able to claim any of my medical I for sure now will work on savings on whatever else I spend money on.
I will try and put a link to your site soon on my website since it’s all about saving money I think the two match up rather nicely. :)
Thank you once again.

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Shane January 18, 2013 at 7:36 am

That is really interesting. I didn’t know about this option that is available. I will certainly have too look into this more. Every bit helps and it can help make a decision as to go here or there.

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Mandy March 19, 2013 at 3:32 am

Yep, I got a VAT refund at Bangkok, UK, Australia when I travel. Great savings and it is not difficult to apply at all. And yes, almost all country’s VAT claim form require original receipt and physically showing the item.

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Hemanth December 27, 2013 at 4:45 pm

Hi, that’s a nice article you wrote there. I was wondering if it is possible as in the case of a visitor to US too. So like, if I buy something here and then leave to Germany for living can I get my taxes back from US?

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John Fisher February 1, 2014 at 7:20 am

Even better is developing a business that will allow you to make some or all of your vacation expenses tax deductible. It’s possible to build a global business with only a few essential skills, no financial risk, a computer, a social networks, and the knowledge of the correct principals. Example: If you have business, for example, in Russia, and you visit Russia to meet with some of your network in Russia (as my wife is currently doing), in America, some or all of that trip may be tax deductible.

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