How About VAT? — Don't Forget the Traveler's Tax Break

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There are plenty of travel sites that tell you how to do things the right way — but as every traveler knows, sometimes things go wrong. In his bi-monthly travel and credit card mistake series, TPG Contributor J. Keith van Straaten invites you to learn from his mistakes — his many, many mistakes.

One of my favorite things to do when traveling is to shop — and most shoppers agree that there's no better place to do so than Europe. For some, it's the idea that you're experiencing the height of fashion; for others it's the old-school craftsmanship. Personally, I like buying things made by local designers to bring home as souvenirs.

But perhaps the best perk of shopping in Europe is that as a non-EU citizen, I get an automatic discount — sort of. Baked into the cost of every item sold in the EU (and a few non-member European countries, as well as many countries outside of Europe) is a Value Added Tax, or VAT. Depending on the product and the country, the VAT can be upwards of 25%. As a visitor, I'm technically exempt from that tax, and if I spend enough and am willing to go through a paperwork and submission process, I can actually have that tax refunded to me when I leave the EU.

And yet ... I haven't.

In the past few years (with the help of the mileage and points I've earned), I've been to Europe five times. Three of those times I shopped till I dropped and got the paperwork needed to get my VAT refund. And yet each time I got on the plane home without submitting for it.

I'm not sure why I haven't submitted the paperwork for a refund — I like money, I swear. I make a point of using a credit card with no foreign transaction fees — like the Chase Sapphire Preferred and United MileagePlus Explorer cards — and when appropriate, I haggle for a good price. I even get far enough into the process that I've asked the shopkeeper to fill out the forms and bring them with the proper receipts to the airport.

So why have I continued to make this mistake? I think it's a combination of the fatigue that sets in by the time I'm ending a trip abroad, paired with the assumption that there'll be some sort of hassle that won't be worth the effort.

I know I'm not alone. Recently I talked with a mix of friends who have and have not taken advantage of the VAT refund process. Can they tell me what I'm missing and how to learn from my mistake?

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My travel friends shopped in various parts of the European Union and brought back their treasures to their homes in the United States and Canada:

Claudette is a frequent visitor to France.

Michele travels extensively across Europe.

Harry has been going to France and Spain for years.

Amanda recently returned from England.

How did you find out about the VAT refund?

Claudette: I must have found out about it from someone in a shop. I've traveled to France quite often. I'm not a big shopper, but when I did shop I was always aware that I could get the VAT form. Shopkeepers don't always mention it because they have to do paperwork and don't always want to.

Amanda: I made a big purchase at Topshop, and they asked me if I was going to claim when I bought the items. It had never occurred to me. Pays to go chain stores on the High Street — they anticipate the tourist.

Most people submit their paperwork at the airport when they leave the EU. What challenges do you run into there?

Claudette: The only thing that's been challenging is getting to the airport early enough to find the office whose name is on the form. I never know: Is it before or after security? I get stressed at airports and want to give myself lots of time. I'd add 45 minutes.

Harry: Better add another hour to prepare.

Claudette: In France it's a nightmare because nothing is easy in France (if they have a way to make it hard, they will).

Amanda: I know at London-Gatwick that they have a booth in the main concourse, with all the food courts and such. Really easy-peasy.

Harry: You may be in one terminal and have to go to another to find the office. They don't necessarily make it easy for you because it's not in their best interest. My girlfriend and I came out of Spain last year and she wanted to recover some VAT. They told her to go to a certain place. I can remember wandering through the airport — they didn't necessarily have a big sign. Had to ask a lot of people. When she finally got in line and waited, she was told she was entitled but needed some form she didn't have.

Michele: Truthfully, it's a very simple process. The hardest part is remembering to ask for the paperwork when you make your purchase. The only thing that could possibly go wrong is if you don't have the items with you at the airport office.

What happens in that office?

Claudette: You go in and sometimes you have to have the merchandise with you. Sometimes I'm wearing it and sometimes I have it in my carry-on because I know they're going to ask to see it. I make sure to have the goods with me so I can show them.

Michele: The tricky thing is who the customs agent is. Technically you're supposed to show them the items you bought, which means you have to do it before you check your luggage or put in carry-on or hope you get a nice agent who rubber stamps without inspecting. It's 50/50. It really is. Once I had a guy who said he needs to see every item on the receipt. Sometimes if it's clothing you don't have to show the exact item, just something similar. Big ticket items are most likely where they want to see it — Rolexes and such.

Harry: You have to establish that you're leaving the country.

Has this changed how you shop in EU countries?

Claudette: I used to not always take my passport with me to shops. Now I do. And I always ask the clerk.

Michele: Bring your passport when you shop. A lot of places will ask for it.

Why didn't you get your refund when you were eligible?

Amanda: I didn't end up doing it because of my stupidity. I didn't know that it was going to be so easy and had put the receipts away in the big suitcase, which of course went in the plane. It was set up in London just like a walk-in store in the rest of the concourse.

Harry: We didn't complete the process because by the time my girlfriend stood in line, got to the person and was told she was missing some document, she would've had to have gone somewhere else to get something, come back and stand in line again. At some point, you say: You know, I'm just going to go on with my life.

How long did it take for you to get your refund?

Claudette: I have it credited back to my credit card on which I made my purchase. It takes between one and three months, with France. I don't even know if I've received it every time. If I haven't received it or notice I didn't get it, I have never challenged it.

Michele: Depends on how much it is. If less than 500 euro, it depends on the airport. It usually takes about a week. Sometimes they'll hand you cash right there.

What would you tell someone in my scenario, who is eligible but hasn't submitted for refund?

Claudette: I would say give it a try. If you find it's too much trouble and cumbersome, don't do it. If it's $50 or so, you're giving that to the government — why give it to the government of a country you don't have to pay when you can get it back? I'd rather have a meal with it, get some sushi when I get home!

Michele: You can try to do it by mail. I don't know what hoops you have to jump through. If you're going back within a year, you can do it within one calendar year. If I forget, I try to do it next time I go over.

Amanda: Nothing is easy.

So, is it worth the trouble?

Claudette: Yes, it's worth it. Especially in Norway. If it's 10 dollars, no — but generally, it's on principle!

Harry: You have to ask how much your time is worth vs the $32 you're going to gain. If you bought a car or a diamond ring, sure. But for shoes ... ?

Michele: Yeah, it's money! I think it's super-easy to do. The more you spend, the more money you get back. The last time I was in Germany, we got something like 300 euros ($322) back. (I bought a lot of lederhosen!) It's worth doing. Why leave money on the table?

So there you have it, folks. Remember that VAT equivalents exist in many countries outside of Europe, as well (e.g., Australia, Argentina, Fiji, Mexico, New Zealand, Thailand, etc.) so be sure to check this global VAT calculator to see if your next trip includes the potential for tax refunds — and have fun shopping!