VAT Refund for Luxury Shoppers in Europe

The term VAT refers to Value-Added Tax, which is similar to a sales tax that is passed on to the consumer at the point of purchase. The VAT examines each stage of production (from raw materials to the finished product) and tax authorities will receive revenue throughout the process. In comparison, the sales tax is paid by the customer during the final sale and only then do the tax authorities receive the revenue.

VAT Rates in Europe

European VAT rates vary between different types of products and services and are often categorized as either super-reduced, reduced, or standard. For luxury shopping goods (e.g., Louis Vuitton, Gucci, Prada etc.,) the standard/highest VAT rates always apply. In several European countries, VAT rates are very high (at least 15%) compared to the local sales tax in the U.S.

European VAT-Refund Operators

Most VAT refunds always have to go through a VAT operator in Europe (e.g., Global Blue and Planet) who typically charge around 4% for their services. Once all the fees are deducted, you can expect to get a VAT refund somewhere between 6% – 15%. See the table below for the VAT refund requirements of all the European countries.

VAT Refund in Europe

Some websites have a VAT refund calculator (https://glocalzone.com/vat-refund-calculator) which can be helpful to quickly check the VAT refund rates of the country you are visiting. See the example below that shows VAT refunds listed high to low by several European countries after spending 1000€ (missing Hungary in the list).

The best countries to buy luxury brand name merchandise and get maximum VAT refunds in Europe are Hungary, Ireland, Portugal and Poland (~14% refund) followed by Italy, Spain, Greece, Austria and France. Croatia and Slovenia don’t have many luxury brand name stores. Budapest (Hungary) has the highest the VAT (27%) out of all European nations with several brand name boutique stores and outlets.

VAT is included in the sticker price in Europe

One of the best things about shopping in Europe is VAT is already included in the sticker price (what you see is what you pay minus the VAT) compared to US, where the sales tax is added to the sticker price at the time of final sale.

Are there real savings when purchasing luxury goods in Europe?

For example, we will compare the Louis Vuitton Bom Dia mule, which costs $1080 plus 7% FL tax (in this example) with a final price of $1155 USD.

Louis Vuitton Bom Dia mule Price in US

I have researched several European countries for the advertised price of Louis Vuitton Bom Dia mules.

Louis Vuitton Bom Dia Mule price in various countries

Out of all the European countries, prices in Spain are a bit cheaper (815€) and I could not get the prices from Hungary or Croatia who charge high VAT fees (25-27%) but also issue bigger refunds (14-19%). Since Switzerland only charges 8% VAT fees, it is not an ideal place to get the maximum VAT refunds when shopping for luxury goods.

Louis Vuitton Bom Dia mule price in Italy

The price in the Italian Louis Vuitton store for the Bom Dia mule is 850 Euros (928 USD) including the VAT.

Final price of Bom Dia mule after VAT refund in Italy

Once you successfully process the VAT refund, you should at least get back 13% of the 850 Euros (~110 Euros or 120 USD). Based on this example, you are paying a final price of $808 USD (928-120) by purchasing the item in Italy compared to purchasing in the US for $1155. This amounts to about $350 difference for this item which gets much higher for more expensive items.

VAT Refund Paperwork in European Stores

Before going for luxury shopping in Europe, one must remember to take the passport along with a credit card that does not charge foreign transaction fees and still earns at least 2 points per dollar spent (e.g., Capital One Venture X). I encourage all interested readers to sign up for a Global Blue membership (https://members.globalblue.com/registration?) which makes it easy to track all the VAT refunds.

Almost all luxury European stores have window signs reading “Tax-free” or “Global Blue”. Before paying for the items, you must inform the sales agent that you are from overseas looking to get a VAT refund on your credit card. Either the store agent or a 3rd party agency (you may have to walk to another area) will complete all of the required paperwork after entering the passport & credit card information online, print out all the documents and neatly fold them in an envelope. If you are able to obtain the above described preprocessed paperwork, it will save you a lot of time in the airport customs office.

It is easy to get a refund on a credit card in the same currency of the country from which you are departing (requesting in US dollars may incur unfavorable conversion fees). Some Global Blue centers in large shopping areas may offer instant refunds after taking a larger commission. You must compare the VAT refund price difference before making a decision.

European Union Countries VAT Refund

2023 EU Countries

Travelers who buy merchandise in a European Union country must process a VAT refund at the last stop in the EU, regardless of where the purchases have been made. For example, if a traveler purchases a Louis Vuitton handbag in Paris, Prada shoes in Rome, and Hermes clothes in Frankfurt, and flies home from Netherlands, the VAT documents must get stamped at the Amsterdam airport.

When non-EU countries are mixed in your travel plans

It is important to know that Turkey, Norway and Switzerland are not part of the EU and should not be considered as the last stop countries for VAT refund purposes. For example, if you have purchased goods in an EU country (e.g., France) and also spent time in Italy and Switzerland before leaving to the US, you must submit VAT refunds in the last EU airport (Italy in this example) prior to arriving in Switzerland.

Final VAT refund process at the international airport

VAT refund at the airport is a 2-step process, especially if you don’t have preprocessed paperwork from the store. You must have your Tax Free Form validated at the airport (Customs Office or a self-validation Kiosk) and then head over to the Tax Refund Kiosk of VAT operators.

It is important to find the customs office location before going to the airline ticketing counter to check your luggage or the security check since some of them are positioned before airport security.

If you DID NOT receive an envelope with refund paperwork at the store, you must bring all your purchases along with receipts and arrive early to the airport to the customs office (expect a long line). To be eligible for airport VAT refunds, the purchased merchandise must be new and still in its packaging when you are at the customs desk. Agents may inspect your purchases and you should be prepared to open the suitcases as needed.

However, on several occasions my wife was wearing the shoes or the handbag she purchased and we just showed the original factory packaging with store receipts to the agent without any issues. Once your forms are stamped by the customs officer, you can go to the Global Blue office for the VAT refund.

If you have already received a prepaid envelope, that means the refund has already been processed and all you have to do is to stop by a Global Blue counter (most are located near the currency exchange area) to see an agent. If the location is closed, you can simply drop off the prepaid envelope inside the mail box (next to the Global Blue counter). Once Global Blue receives the stamped forms back within 3 months of purchase after the immigration stamp (to prove that you have left Europe), they will process the credit card refund.

Should you keep the original boxes of the merchandise after the VAT refund has been processed

Many people hold onto the designer brand merchandise’s original boxes and store receipts for probable resale or warranty repairs. It is important to ensure you are not exceeding the duty-free limits of US customs ($800 per person) upon arrival. It is not wise to declare nothing and walk by the customs agents with multiple designer shopping bags (I have seen people get stopped at the Customs Green Line for this reason).

Paying customs after coming to the U.S.

Travelers are permitted to bring up to $800 worth of merchandise per person back to the United States without having to pay duty. If you are traveling with a family of 4, you are allowed to bring $3200 worth of goods duty free.

Items from certain countries (e.g., Chile, Singapore, Canada, and Mexico) may be duty-free or have reduced taxes under previously negotiated agreements with the United States government. However, these items still need to be declared when you enter the United States.

Conclusion

Luxury brand name shoppers can certainly get the items for a significantly lower price in Europe even before the VAT refund. It is important to ask the store to prepare the paperwork and be early at the airport for the VAT refunds.