What is Tax Free shopping and how does it work?

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Countries offer VAT refunds to attract tourists and increase sales, with technology simplifying the process. Retailers integrating tax-free solutions at the point of sale enhance the shopping experience, fostering loyalty and competitive advantage. 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</div> <div class="share-button coh-link coh-style-primary-dark-atom-"> Share </div> </div> <div class="article-main-image" style="background-image:url(https://www.weareplanet.com/sites/default/files/2024-03/Tax-free-shopping-blog.jpg)"></div> </div> </div> </div> </div> <div class="coh-row"> <div class="coh-row-inner"> <div class="coh-column coh-visible-sm coh-col-sm-12 coh-visible-xl coh-col-xl-3"> <div class="dynamic-index-wrapper desktop-version"> <div class="index-sticky" style="display: none"> <div class="index-title" style="text-transform: uppercase">In this article</div> <div class="index-list"></div> </div> </div> </div> <div class="coh-column coh-visible-sm coh-col-sm-12 coh-visible-xl coh-col-xl-7"> <div class="article-content-wrapper" style="padding-top: 0"> <div class="single-layout-canvas">     <div>     <div class="coh-wysiwyg ssa-component coh-component ssa-component-instance-a6f772dc-279e-4e92-b8b3-9681c73971be coh-component-instance-a6f772dc-279e-4e92-b8b3-9681c73971be" > <p><span class="coh-style-h500">What is Tax Free shopping?</span><br><span class="coh-style-b200">Tax Free shopping is the ability for international tourists to purchase goods in their destination country without paying the value-added tax (VAT) that applies to local residents. In some cases, refund forms are automatically issued at the point of sale and, in other cases, tourists must save their receipts and request refunds via VAT refund desks, self-service kiosks, or online.  </span></p><p><span class="coh-style-b200">Although not every tourist or retailer takes advantage of Tax Free shopping, both stand to gain from these common government-backed schemes. Fortunately, as technology for claiming VAT refunds advances and gets more accessible, more individuals, businesses, and local economies can experience the benefits of Tax Free shopping. </span></p> </div>      <div class="coh-inline-element ssa-component coh-component ssa-component-instance-4333690f-4af2-4ec7-bc11-07b2ab90f832 coh-component-instance-4333690f-4af2-4ec7-bc11-07b2ab90f832 coh-style-tip-box-icon-dull-blue-"><div class="coh-wysiwyg coh-ce-cpt_tip_box-ebba4054" > <p><span class="coh-style-heading-4-planet">Good to know</span></p><ul><li><span class="coh-style-b200">Tax Free shopping is when VAT or “sales tax” is waived for international tourists. </span></li><li><span class="coh-style-b200">Many countries across the world have VAT refund policies in place for international tourists, although certain restrictions and eligibility rules apply. </span></li><li><span class="coh-style-b200">International travellers can participate in Tax Free shopping by shopping at participating retailers and submitting an export-validated Tax Free form at the end of their stay. </span></li><li><span class="coh-style-b200">Retail and hospitality businesses benefit from integrating Tax Free shopping solutions at the point of sale, as it encourages tourists to spend more, provides value and convenience for their customers, and fosters brand loyalty. </span></li><li><span class="coh-style-b200">Countries that make it easy to claim VAT refunds increase their appeal as tourist destinations, encouraging word-of-mouth referrals and repeat travel. </span></li></ul> </div> </div>      <div class="coh-wysiwyg ssa-component coh-component ssa-component-instance-f3976980-f62b-4608-a55e-41c5a7122549 coh-component-instance-f3976980-f62b-4608-a55e-41c5a7122549" > <p><span class="coh-style-h500">The philosophy behind Tax Free shopping</span><br><span class="coh-style-b200">Why would a country allow tourists to bypass taxes that could bring in huge sums of money for the government? Although it may seem counterintuitive, there are two main reasons why so many countries have established VAT refund policies for international visitors. </span></p><p><span class="coh-style-heading-5-planet">1. Fairness</span><br><span class="coh-style-b200">As non-residents, tourists won’t benefit from the long-term impact of local taxes (e.g. public services, infrastructure, etc.). In this respect, one can argue that it’s simply not fair for tourists to contribute to tax-funded projects in which they have no direct benefit.</span></p><p><span class="coh-style-heading-5-planet">2. Increased spending</span><br><span class="coh-style-b200">VAT refund policies encourage spending and fuel the local economy. Tax Free shopping essentially lowers the price tag on items so that tourists end up spending more in their destination than they would have otherwise. This boost to spending more than makes up for the small percentage that’s refunded from each purchase. </span></p><p><span class="coh-style-b200">Plus, although many tourists shop with the intention of claiming back VAT at the end of their holiday, many fail to follow through on this task. This is a win-win situation for the destination country, as the economy benefits from increased spending and the unclaimed refunds end up as further tax revenue for the government.</span><br><span class="coh-style-h500">How does Tax Free shopping work?</span></p><p><span class="coh-style-heading-4-planet">Tax Free shopping destinations</span><br><span class="coh-style-b200">Although many countries across Europe, Asia, and beyond offer Tax Free shopping for international visitors, the rules vary from destination to destination. Most countries with Tax Free shopping policies will have a minimum purchase limit before a tax refund can apply. It’s also common for there to be restrictions on the types of goods that are eligible for VAT refunds and the timeframe that tourists have to request their refunds. </span></p><p><span class="coh-style-b200">Other countries, particularly those without a federal sales tax rate like the United States, don’t have a nationwide tax refund policy for tourists at all. </span></p><p><span class="coh-style-b200">Before travelling to a new destination, it’s always worthwhile for tourists to research the country’s tax refund policy in order to plan ahead and maximise the potential savings.</span></p><p><span class="coh-style-heading-4-planet">Ways to participate in Tax Free shopping</span><br><span class="coh-style-b200">Regardless of the destination country, if you’d like to shop Tax Free while abroad, you first must make sure to shop at retailers that participate in Tax Free shopping, and you must let them know you would like a VAT refund for the goods you’re purchasing. You’ll also need to have your passport with you for the retailer to review. </span></p><p><span class="coh-style-b200">After you’ve purchased your items in a participating shop, you need to complete a Tax Free form for validation by the local customs authorities. Certain retailers may automatically complete and issue this form for you digitally at the point of sale. Others will provide the form for manual completion. </span></p><p><span class="coh-style-heading-5-planet">Below are the most common methods for Tax Free shopping. </span></p><ul><li><span class="coh-style-b200"><strong>VAT refund counters</strong></span><br><span class="coh-style-b200">The traditional method of receiving VAT refunds is to locate an official refund desk, most likely at the airport, and speak with the person behind the counter. They will view your passport, view your sales receipts, walk you through the required paperwork, calculate the amount you are owed, and process your refund.</span></li><li><span class="coh-style-b200"><strong>Self-service Tax Free shopping kiosks</strong></span><br><span class="coh-style-b200">Self-service kiosks for VAT refunds walk you through the process of claiming your refund. You can simply locate a kiosk at the airport, scan your passport, confirm your details, and scan the barcode on your validated Tax Free form. The machine will calculate how much you’re owed and either issue the refund back to the card that was used, provide it in cash directly like at an ATM, or print out a voucher that you can redeem at a designated refund desk.</span></li><li><span class="coh-style-b200"><strong>Tax Free shopping at the point of sale </strong></span><br><span class="coh-style-b200">More and more retailers automate and digitise the VAT refund process directly at the checkout till. </span><a href="https://www.weareplanet.com/blog/what-is-point-sale-pos-system"><span class="coh-style-b200">Modern Electronic Point Of Sale (EPOS)</span></a><span class="coh-style-b200"> tills that are integrated with Tax Free shopping software can automatically detect your credit card origin and issue the Tax Free form with no manual data entry required. This makes the process of validating the form at the airport and submitting it to the service provider even easier. </span></li><li><span class="coh-style-b200"><strong>Online and mobile app Tax Free shopping services</strong></span><br><span class="coh-style-b200">In some cases, depending on the destination country and the company managing the refund, you can use a mobile app or website to complete your Tax Free forms at the point of sale and track the progress of your refund. </span></li></ul><p><span class="coh-style-b200 coh-style-tip-box-icon-bright-blue-"><strong>Good to know:</strong> It is important to stress that all Tax Free forms must be “export validated” in order to be processed. In most cases, this means that they must be stamped or digitally validated by customs officials at the destination airport prior to leaving the country. </span></p><p><span class="coh-style-h500">What are “integrated” Tax Free shopping solutions?</span><br><span class="coh-style-b200">Integrated Tax Free shopping solutions refer to payment tools and software that businesses can use to encourage and facilitate Tax Free shopping at their locations without complicating or disrupting their existing sales process. </span></p><p><span class="coh-style-b200">The primary way in which businesses can integrate Tax Free shopping into their sales process is to use an electronic point-of-sale (EPOS) system that automates and digitises the VAT refund procedure. In addition to digitising and issuing Tax Free forms, these sophisticated payment systems can also offer currency conversion based on the shopper’s country of origin and the prevailing exchange rate. By integrating these features into a robust payment processing system, merchants add value for their customers without compromising security, efficiency, and customer service.</span></p><p class="coh-style-tip-box-icon-bright-blue-"><span class="coh-style-b200"><strong>Good to know</strong></span><br>- <a href="https://www.weareplanet.com/case-studies/el-corte-ingles">Discover how El Corte Inglés improved the Tax Free experience for their shoppers</a></p><p><span class="coh-style-h500">Benefits of Tax Free shopping for businesses</span></p><p><span class="coh-style-heading-4-planet">1. Attracts international tourists</span><br><span class="coh-style-b200">Many international tourists, particularly those who plan to spend time shopping at their destination, are attracted to businesses that make Tax Free shopping easy. For example, a retail shop with a card machine that automatically issues a VAT refund form based on the origin of a patron’s credit card is offering a valuable service that will draw in customers. Similarly, an airport that has a seamless VAT refund process for international travellers will enhance the experience of its tourists and increase word-of-mouth referrals and repeat travel to that destination.</span></p><p><span class="coh-style-heading-4-planet">2. Encourages more spending</span><br><span class="coh-style-b200">A VAT refund is money that goes back into a tourist’s pocket, increasing their spending budget and, more often than not, encouraging them to make additional purchases. Even if a tourist doesn’t receive their refund until the end of their holiday, simply knowing that they’ll be refunded VAT in future can incentivise them to add more items to their shopping basket, or spring for a higher priced item they might otherwise forgo.</span></p><p><span class="coh-style-heading-4-planet">3. Streamlines the sales process</span><br><span class="coh-style-b200">Before the advent of more integrated Tax Free shopping solutions, retailers who wanted to offer their customers VAT refunds had to provide the shopper with physical paperwork at the checkout counter. After completing the form, the employee would need to manually process the paperwork, verify the details, and submit it for approval to the tax authorities. This process was time-consuming for the retailer and the customer, so much so that many opted not to complete it at all. An integrated system that automates Tax Free forms through the point-of-sale system saves time, stress, and effort for everyone involved.</span></p><p><span class="coh-style-heading-4-planet">4. Gives a competitive edge</span><br><span class="coh-style-b200">Retail and hospitality businesses that integrate Tax Free shopping into their sales process give international tourists one more reason to choose them over a competitor. This is particularly true for people who travel frequently for business, for those who routinely visit the same destination, and for affluent tourists, all of whom are particularly less inclined to wait in queues at airport refund desks or to complete lengthy paperwork. These types of travellers appreciate having a completely stress-free refund process that doesn’t take any time out of their day. </span></p><p><span class="coh-style-heading-4-planet">5. Fosters customer loyalty</span><br><span class="coh-style-b200">As with any service that adds value for a customer, quick and seamless Tax Freeshopping keeps shoppers coming back. It demonstrates to customers that you value their time and prioritise their convenience. This creates a positive experience that fosters loyalty and boosts your business’ reputation. </span><br><span class="coh-style-h500">The future of Tax Free shopping</span></p><p><span class="coh-style-b200">Although Tax Free shopping schemes have been in place for some time, advances over the last decade have made the VAT refund process much easier and more accessible for tourists and businesses alike. While many once questioned whether claiming refunds was even worth the time and hassle, digitising and streamlining the process has transformed this mindset. Increasingly, more countries are adopting Tax Free shopping schemes, more businesses are participating, and more tourists are claiming their VAT refunds. </span></p><p><span class="coh-style-b200">As technology continues to evolve, and as more countries recognise the benefits of Tax Free shopping in their economies, we can expect to see wider participation in these schemes, further automation of the refund process, quicker refund processing times, and more cross-border standardisation of the Tax Free shopping experience. </span></p> </div>      <div class="coh-wysiwyg ssa-component coh-component ssa-component-instance-c304c003-2e7e-4ce3-8b0a-10c5c216150b coh-component-instance-c304c003-2e7e-4ce3-8b0a-10c5c216150b" > </div> <a href="javascript:void(0)" class="coh-link ssa-component coh-component ssa-component-instance-c304c003-2e7e-4ce3-8b0a-10c5c216150b coh-component-instance-c304c003-2e7e-4ce3-8b0a-10c5c216150b" > </a> <div class="coh-container ssa-component coh-component ssa-component-instance-c304c003-2e7e-4ce3-8b0a-10c5c216150b coh-component-instance-c304c003-2e7e-4ce3-8b0a-10c5c216150b ssa-instance-35ec83088a5654bf4c65539042ed135f coh-ce-cpt_link_box-4d371e07" > <div class="coh-row coh-row-bleed-xl coh-row-visible-xl" data-coh-row-match-heights="{"xl":{"target":"none"}}"> <div class="coh-row-inner coh-ce-cpt_link_box-30b87dce"> <div class="coh-column coh-visible-xs coh-col-xs-12 coh-visible-sm coh-col-sm-6 coh-visible-xl coh-col-xl-6" > <div class="coh-inline-element ssa-instance-35ec83088a5654bf4c65539042ed135f coh-ce-cpt_link_box-59eac7e2"></div> </div> <div class="coh-column coh-visible-xs coh-col-xs-12 coh-visible-sm coh-col-sm-6 coh-visible-md coh-col-md-6 coh-visible-xl coh-col-xl-6" > <span class="coh-inline-element coh-ce-cpt_link_box-c6d6e7f7"><h4 class="coh-heading coh-style-heading-4-planet coh-ce-cpt_link_box-23afc3d4" > Unlock Tax Free for your business </h4> <div class="coh-inline-element card-button-wrapper coh-ce-cpt_link_box-893d7a59"><a href="https://www.weareplanet.com/vat-refund" class="coh-link card-button coh-ce-cpt_link_box-b808e611" title="Learn more" target="_blank" > Learn more <div class="coh-wysiwyg" > <p><img alt src="/resources/icons/blue-right-arrow.svg"></p> </div> </a> </div> </span> </div> </div> </div> </div>      <div class="coh-inline-element ssa-component coh-component ssa-component-instance-4071605b-ccc5-4f9e-9b6c-decec2facfed coh-component-instance-4071605b-ccc5-4f9e-9b6c-decec2facfed coh-ce-cpt_separator-662262d5"></div>      <div class="coh-wysiwyg ssa-component coh-component ssa-component-instance-1ac62c3b-d202-4fc3-b244-977b24883b46 coh-component-instance-1ac62c3b-d202-4fc3-b244-977b24883b46" > <p><span class="coh-style-h500">FAQs</span><br><span class="coh-style-heading-4-planet">What is the typical VAT rate? How much can international tourists actually recoup from Tax Free shopping?</span><br><span class="coh-style-b200">The potential savings for international tourists who take part in Tax Free shopping are significant. VAT rates vary from country to country, but tend to hover around 20 per cent. After deducting administrative and service fees, tourists often get back around  10 to 15 per cent of what they spend. For example, if someone were to spend €500 on a  new handbag while on holiday in Paris—France has a VAT rate of 20 per cent—after admin and service fees, they might expect to be refunded €50 to €75. </span></p><p><span class="coh-style-b200 coh-style-tip-box-icon-bright-blue-">Good to know: Keep in mind that minimum and maximum purchase rules apply</span></p><p class="coh-style-b200"><span class="coh-style-heading-4-planet">What items are usually eligible for VAT refunds?</span><br><span class="coh-style-b200">Most goods that are bought for personal use, meet the minimum purchase threshold, and are taken by the tourist when they leave the destination, are eligible for a tax refund in countries with VAT refund policies. However, certain luxury goods that exceed a certain price may have limitations to the amount of tax that can be claimed back. </span></p><p><span class="coh-style-b200">Items that are not typically eligible for VAT refunds are: </span><br><span class="coh-style-b200">- Intangible goods/services</span><br><span class="coh-style-b200">- Food and beverages</span><br><span class="coh-style-b200">- Items purchased for business use</span><br><span class="coh-style-b200">- Items purchased from non-participating retailers</span><br><span class="coh-style-b200">- Items below the minimum price threshold </span><br><span class="coh-style-b200">- Items that have been opened and used prior to export</span></p><p><span class="coh-style-heading-4-planet">How can tourists identify shops that offer automated VAT refunds?</span><br><span class="coh-style-b200">Tourists who want to take advantage of Tax Free shopping should look for retailers that display a Tax Free shopping logo on their premises, often as a decal in their storefront window and/or at the checkout counter.    </span><br><br><span class="coh-style-heading-4-planet">How can tourists track their refunds?</span><br><span class="coh-style-b200">The process for tracking a refund will depend on the country where the refund was requested, how the refund was requested, and the entity that is managing the refund process. </span></p><p><span class="coh-style-b200">Although some VAT refunds are managed directly by customs agents and the country’s tax authorities, it’s more common for the process to be managed by a third-party service provider. Tourists will likely need to take the following steps to track their refund:</span></p><p><span class="coh-style-b200">1. Check their Tax Free form to determine which third-party provider is managing the refund. </span><br><span class="coh-style-b200">2. Visit that provider’s website and locate the tracking page. </span><br><span class="coh-style-b200">3. Enter their Tax Free Form number / barcode in order to view the current status of their refund.</span></p><p><span class="coh-style-heading-4-planet">How long does the Tax Free shopping refund process take?</span><br><span class="coh-style-b200">Firstly, it’s essential that tourists submit their refund requests within the required timeframe laid out by the destination country’s tax authorities and, if applicable, the third-party service provider that is managing the refund. This timeline varies from country to country and provider to provider. </span></p><p><span class="coh-style-b200">The time it takes for tourists to receive their refund also varies based on how they request it, the policies of the destination country, the refund management company, and whether they've chosen to receive the refund in cash or by card.</span></p><p><span class="coh-style-b200">For refunds to a credit card, it typically takes a few weeks, or up to 30 days, to receive the funds. Cash refunds, on the other hand, are issued instantly either via a kiosk or airport refund counter. Keep in mind that there is usually an added fee for receiving the refund in cash.</span></p> </div>      <div class="coh-wysiwyg ssa-component coh-component ssa-component-instance-b590e9a1-7816-4a0e-b45f-ce2eb5c0c7e7 coh-component-instance-b590e9a1-7816-4a0e-b45f-ce2eb5c0c7e7" > </div> <a href="javascript:void(0)" class="coh-link ssa-component coh-component ssa-component-instance-b590e9a1-7816-4a0e-b45f-ce2eb5c0c7e7 coh-component-instance-b590e9a1-7816-4a0e-b45f-ce2eb5c0c7e7" > </a> <div class="coh-container ssa-component coh-component ssa-component-instance-b590e9a1-7816-4a0e-b45f-ce2eb5c0c7e7 coh-component-instance-b590e9a1-7816-4a0e-b45f-ce2eb5c0c7e7 ssa-instance-52e1c3a4b5be1947ab95e87d145a584a coh-ce-cpt_link_box-4d371e07" > <div class="coh-row coh-row-bleed-xl coh-row-visible-xl" data-coh-row-match-heights="{"xl":{"target":"none"}}"> <div class="coh-row-inner coh-ce-cpt_link_box-30b87dce"> <div class="coh-column coh-visible-xs coh-col-xs-12 coh-visible-sm coh-col-sm-6 coh-visible-xl coh-col-xl-6" > <div class="coh-inline-element ssa-instance-52e1c3a4b5be1947ab95e87d145a584a coh-ce-cpt_link_box-59eac7e2"></div> </div> <div class="coh-column coh-visible-xs coh-col-xs-12 coh-visible-sm coh-col-sm-6 coh-visible-md coh-col-md-6 coh-visible-xl coh-col-xl-6" > <span class="coh-inline-element coh-ce-cpt_link_box-c6d6e7f7"><h4 class="coh-heading coh-style-heading-4-planet coh-ce-cpt_link_box-23afc3d4" > Talk to one of our Tax Free experts </h4> <div class="coh-inline-element card-button-wrapper coh-ce-cpt_link_box-893d7a59"><a href="https://www.weareplanet.com/contact/sales" class="coh-link card-button coh-ce-cpt_link_box-b808e611" title="Get in touch" target="_blank" > Get in touch <div class="coh-wysiwyg" > <p><img alt src="/resources/icons/blue-right-arrow.svg"></p> </div> </a> </div> </span> </div> </div> </div> </div>  </div>  </div> </div> </div> </div> </div> </div> <div class="article-related-articles"> <div class="coh-container-boxed"> <div 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