What is Tax Free Shopping? (VAT Refunds) | Pie Systems FAQ

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What is Tax Free Shopping? (VAT Refunds)

What is Tax Free Shopping? (VAT Refunds)

What is Tax Free? Who qualifies?

Written by Charlotte

Updated over a year ago

Great question! Tax free shopping is one of those life hacks that can really help tourists save some $$$s 🤩

On a basic level, tax free shopping (VAT Refunds) is a system that allows tourists to refund their VAT on purchases they make while traveling abroad as long as they bring those purchased goods home with them.

If you are a visitor to the EU and are about to leave EU territory to go home or to some other place outside the EU, you may be able to buy goods free of VAT.

Too good to be true?

Not at all! 😀

VAT refunds are supported by over 50 countries, with more countries adding this incentive each year.

At its core - this is a great incentive for drawing tourists to countries and encouraging shopping!

How much can I save?

It depends on what the VAT rate is for the country you shop in. For Europe, this could be as high as 25% savings. In Asia, it can be around 10%.

What is VAT?

Value-added tax (VAT) is a multi-stage sales tax, the final burden of which is borne by the private consumer. VAT at the appropriate rate will be included in the price you pay for the goods you purchase. As a visitor to the EU returning home or going on to another non-EU country, you may be eligible to buy goods free of VAT in special shops.

Who is a ‘visitor’?

A ‘visitor’ is any person who permanently or habitually lives in a country outside the EU. Your address as shown in your passport or another identity document will be taken as the place where you permanently or habitually live.

Example: Eduardo lives and works in Brazil but spends three months every summer in Portugal, where he has a time-share in a villa. Eduardo’s permanent address is in Brazil, so he is a ‘visitor’ to the EU while in Portugal.

In some countries, you may also qualify as a ‘visitor’ if you are living in an EU country for a defined period of time for a specific purpose, but your permanent home is outside the EU and you are not intending to return to the EU in the immediate future. EU citizens permanently living in non-EU countries are also eligible for the VAT refund.

Example: Paul is a Belgian citizen but lives permanently in Canada. Once a year, he returns to Belgium to visit his parents. Paul is a ‘visitor’ and can apply for a refund on the basis of his Canadian residence card.