VAT refund in Europe: A complete guide to tax-free shopping in Europe for tourists

Eyeing for some luxury hauls, exquisite souvenirs, or even just everyday essentials on your trip to Europe? As a UK resident, you are here for a pleasant surprise—you might be eligible for a VAT refund! VAT rates in Europe are notoriously high - soaring as high as 27%. So a VAT refund is a significant save on your travelling budget.

Many travellers miss out on this fantastic opportunity to claim back VAT refund in Europe - simply because they’re unaware of the scheme or think the process is overly complicated. Don’t make the same mistake! Dive into this practical guide and discover how to maximise your VAT tax refund in Europe. Your shopping spree just will just get a lot more rewarding!

There's also a bonus tip to save even more: consider receiving your VAT refund in Europe through the Wise debit card! More on that later!

How much is VAT in Europe?

As you might have already known, many countries are bound to Europe geographically, but they are not in the European Union (EU) - just like the UK. As a result, VAT regulations and rates differ from country to country.

In general, the EU VAT rates are not harmonised even at EU level, but all EU Member States still need to adhere to a certain common system of VAT, with the general rate set at a minimum of 15%. The members can also set reduced rates for certain goods and services, as long as it is at least 5%. Some basic goods and services such as medical care or social services are exempted from VAT altogether¹. Typically, the standard VAT rate among the members will range from 17% - 27%, while reduced rates fall between 5% and 18%.

If you’re travelling to a European country that is not part of the EU, countries, such as Iceland, Liechtenstein, Norway, or Switzerland, aren’t bound by the same EU regulations, so their VAT rates can be lower than the EU threshold, and their rates also vary depending on each country. For example, Switzerland has a standard VAT rate of just 8.1%, with a special rate of 3.8%, and a reduced rate of 2.6%². Conversely, Iceland’s standard rate is relatively higher with 24 percent, while its reduced VAT rate is already 11%³.

How much VAT is refunded in Europe?

The percentage of your VAT refunds in Europe will differ depending on the country, and the actual refund amount you receive may change as well due to potential fees you might need to cover:

• Intermediary Fees: A lot of countries use VAT refund agents to handle your refund, and they charge administration fees that get deducted from your refund. The fees can differ depending on the agent and how much you’ve spent. To know the exact fee, you can check out the VAT refund calculator from the agent you’re working with in that country
• Foreign Exchange Fees: If you choose to receive your refund via a British card, you may need to pay extra foreign exchange fees, which can further reduce your actual VAT refund in Europe.

Which country has the highest VAT refund in Europe?

Determining which country offers the highest VAT refund in Europe can be quite complex: each country has different calculation methods and charges varying commission fees.

But since VAT refunds in Europe are typically a percentage of your total purchase price, you can roughly guess the highest VAT refund in Europe by considering the VAT rates in each country.

For instance, you can expect a higher VAT refund in Hungary because the country currently has the highest VAT rate in Europe with a standard rate of 27%⁴. Conversely, Luxembourg has the lowest standard VAT rate, which is at 17%⁵. So, you might see a smaller VAT refund percentage in Luxembourg.

But of course, you should only use the VAT rates for reference; they are not the whole picture. There are other fees mentioned above that will ultimately affect your final VAT tax Europe refund.

Who is eligible for tax-free shopping in Europe?

Again, each country has its own specific requirements for travellers to be eligible for VAT refunds. Yet you will need to satisfy these common eligibilities for a VAT refund in Europe⁶:

• You must have a permanent address or habitual residence outside of Europe;
• You need to take the unused goods with you in your personal luggage when you are travelling back to the UK. The typical time limit for exporting these goods is generally within three months from the purchase date; however, this can vary by country, so it’s essential to check the specific regulations of the country where you shopped; and
• Your single purchase or total value on invoices must exceed a specific amount. You can refer to this table for a quick overview—most of the minimum requirements include VAT, except in the case of Turkey:

How do you get a VAT refund in Europe?

Different European countries will have their own procedures for you to get a VAT refund, but these are indeed some general steps you can follow.

Can you get a VAT tax refund after leaving Europe?

If you have already left Europe and forgotten to claim your VAT refund, you cannot receive it afterwards.

Unfortunately, many travellers have made this mistake, and later on realise how much money they could have saved on VAT refunds in Europe. Avoid this situation, make sure to follow these steps to claim your refund before you depart.

Receive a tax exemption form

First things first, you might need to request a VAT refund document while shopping.

This form is referred to differently depending on the country. In Germany, it’s called an Ausfuhrbescheinigung (export papers), while in Malta, it’s known as the Application for Refund of VAT form. Some countries, like the Netherlands, Spain, or France, even allow you to handle this through an online platform.

The best way to start your VAT refund in Europe is by asking the shop you’re visiting about their VAT refund policy. Most well-known brands catering to tourists will have this process set up anyway, but you might also find similar policies in boutiques and independent shops. In many European countries, shops will ask you to present some officially recognized identity documents, so remember to bring at least one with you when you go shopping (e.g., your passport).

Have the forms stamped

If you are leaving any EU member country, you will need to get your VAT refund form stamped at the last point of exit within the EU. For example, if you buy a shiny new phone in Italy but your last stop in the EU is France, make sure to get all your forms stamped when you are at the airport in France! Otherwise, you might not be able to claim your EU VAT refund anymore!

If you are flying from a country that is not a member of the EU, make sure to get your goods validated and your form stamped before leaving that country.

You may need to send these forms back to the shops. In many countries, you can either mail them yourself using a dropbox located at the airport or seek help from a tax refund agent to send these forms back.

Obtain a VAT refund

You're now ready to claim your VAT refund in Europe! Depending on the country and refund agent, you’ll have several payment options. The most common ways to receive your refund are either in cash or credited to your card, but some agents or countries may also offer digital wallet transfers. The time it takes to receive your refund can vary as well.

Make sure to ask about all available payment methods and when you can expect to receive your refund. It's always best to have a clear understanding of your options upfront

You now have the complete guide to tax-free shopping in Europe, specially tailored for UK travellers. The process is relatively straightforward- you can use this as a general guideline for any European country.

And here’s the best part: you can save even more money with Wise!

You can receive your VAT with your British bank card, but you might need to pay extra foreign exchange fees. This is because when your card's main currency (e.g., GBP) differs from the local currency (e.g., EUR), it will be automatically converted every time you use it. The card issuer determines the conversion rate, typically with a hidden and cost markup. With a Wise debit card, you can easily minimise this fee!

What makes this card even better? It allows you to easily switch between EUR and GBP, but it doesn’t stop there. If you decide to travel to another country, you can effortlessly convert to 40+ other currencies for a small fee, all at mid-market rates!

Maximising your savings - Order your Wise card for a one-time fee of 7 GBP today!

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Please also be aware that tax rates and regulations may change over time. Always verify the information with official sources for the most accurate and up-to-date guidance.

Sources used for this article:

Sources last checked on 30-Sep-2024.