VAT Tax Refund in Europe

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I had always heard about the benefits of buying luxury bags in Europe, but hadn’t experienced it myself until last year and wanted to share what I had learned to others who might not know.

First off, buying something expensive in Europe is much more affordable now than it was say 10 years ago.  The exchange rate between the dollar and the euro has highly improved, for Americans at least.  As a reference point, 1 Euro was worth $1.44 on January 1, 2010 and that same Euro on January 1, 2020 is $1.12.  Now, a $0.32 difference doesn’t seem like a lot of money, but when you’re buying $1,000 purse, that difference is $320.

Second, the European Union issues a tax that tourists are entitled to get refunded since they are not residents. It is called the VAT Tax.  This is a tax that all Europeans have to pay; call it a sales tax, but since tourists are leaving with the goods, it is essentially an export which should not be taxed.  Here is how it works: You buy a €1000 euro bag in Europe.  The VAT Tax is already included in the €1000 price tag so you don’t have to add that pesky 9.5% to the price tag like you do in Los Angeles. But as you’re leaving a country within the European Union, you can submit a form to get that vat tax back, which comes out to about 12% of your purchase.

Lastly, I’m not entirely sure why prices differ between the US and the EU, but for some reason, once you factor in the exchange rate, the bag is actually cheaper in Europe even without the VAT tax refund.

Here’s a real life example of the bag that I want and am considering getting when I next go to Europe.  Check it out, what a BEAUT.

If you click on the links below, you can see that the US version of the bag is $2,230 ($2,441.85 if you add a 9.5% sales tax) and when you click on the second link, the European version is €1,650 which converts to $1,848.

Then, once you get to the airport, submit your forms, and wait 5-7 business days, you will get 12% back credited back to your credit card.  So a bag that is $2,441.85 in the US comes out to be $1,626.24 if you purchase it in Europe, that’s a 33.4% discount on a LOUIS VUITTON item.  If that doesn’t convince you, I don’t know what will.

VAT Tax v2

Below is how you logistically get the vat tax refund on goods (it does not apply to food or hotels, mostly just retail goods).

When you make your purchase and qualify for the minimum spend, ask the store for a vat tax form.  They will need your passport and you will have to fill out your address.  Keep this form when you go to the airport! You will need to submit it in your departing European country.  I tried to submit it in Italy, but since my next place to visit was in Budapest, they would not let me so I had to hold onto it until I left Budapest to come home.  I can only attest to a few places and their processes, but hopefully the below helps.

Paris – I would say Paris is the easiest place to submit for your vat tax refund.  Minimum spend is €180 at one store.  Once you get to the airport, before you go into security, you have to go to the “Tax refund self serve kiosks”.  Bring your forms with you and they stamp it for you, there’s a quick 5 minute questionnaire, then you’re done.

Spain (Madrid) – Go to the self serve kiosks and fill out the forms which is before security.  What’s weird is that to get your forms stamped, you need to go through security You have to get your vat tax stamped by customs. There was no minimum spend for Spain!

Italy (Venice Airport) – you get it stamped before security and drop off an envelope near there.

Budapest – this was the least convenient.  You need to get it stamped before security, but then the mailbox to mail the forms are far away from the customs desk.  For me, it was in a red mailbox post near the entrance.

I had never thought to ask WHY the EU even gives this tax back because I was just happy that it was even an option, but I did some research. When the European Union was first created, apparently there were different forms of indirect taxation on exports which made it difficult to audit between the countries.  This unified and Value-Added Tax formation was created for all countries within the EU. I’m pretty sure I’m supposed to cite this, so here’s the link.😉

So there’s your lesson in saving money on luxury bags! Happy spending

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