What is Tax-Free Shopping (TFS)?
“VAT Refunds, Tax-Free Shopping” … we hear these terms a lot when someone’s flying back from London or ending their week-long shopping spree in Paris. So, what’s it all about?? When trying to learn more online, you’ll find only a handful of YouTube channels trying to break processes down for you, as it can be quite tedious to understand. So, what’s a simpler way to explain this to tourist shoppers just like you and me? In a nutshell, claiming a VAT (Value-Added Tax) Refund is a way in which to reward tourists for choosing to retail shop in a particular country. The government of a country gives an added benefit to tourists who shop in their country by essentially returning the Sales Tax back to the shopper. This is meant to act as an incentive for tourists to visit the country as well as spend their money there. The VAT amount differs from country to country but is on average about 20% in Europe. Currently, you can enjoy Tax-Free Shopping in 55 countries on 6 continents!
How does it work?
You’ve made your purchase overseas as a tourist and now it comes down to the most crucial part – how do you claim a VAT Refund? How does this even work? Typically, the current system’s process is that when the tourist makes a purchase at a store, they request a VAT Refund Form. The retailer will generate a form provided by their VAT Operator partner. You will need to have your details filled in on the form.
When leaving the country, you must show your goods to Customs and get a Custom’s stamp. Present your Refund Form, passport, receipts to Customs authorities. Remember to have your purchases on hand as Customs officers may decide to check them. Once you have received a Customs stamp proceed to the nearby Tax-Free Operator’s counters and get your forms validated by the Operator who will then give you your refund. Another way is to drop your forms in the provided mailbox however it will take much longer for you to get your refund.
What are the problems?
There are a number of pain points for tourists when implementing the current system.
In a world that’s rampantly shifting towards a digital era, the paper-based VAT Refund system doesn’t seem to cut it. With several systematic steps to follow, the entire method seems exceptionally slow and old school.
In today’s day, we expect things instantly; the Tax-Free Shopping industry has not evolved since its inception. Also, the vast number of paper forms produced is a real detriment for the environment. Furthermore, did you know that there are massive fees taken by the VAT Refund Operators, sometimes up to 40% of your total refund amount? Quite a shocker. The governments that offer VAT Refunds allow 100% of the refund to be given to the tourist, however most of us just aren’t told this. Such a large amount of the tourist’s VAT Refund should not be taken in hidden fees and costs. So where is the consumer’s power in this?
Another huge problem is the long waiting times when queuing for your refund at the airport. When rushing to catch a flight the last thing you want to think about is spending a long time queuing up for your VAT Refund. Sometimes at major airports the queue can last a few hours! Causing many passengers to forego their refunds in order to make their flights. The system right now is simply not user friendly.
We really do need a change in the current VAT industry and we need it now.
2019 is your year, as UTU Tax Free will be introducing a suite of flexible digital products for your every tourist shopping need.