Reclaiming the VAT
Thousands of travelers are losing serious money because
they are not reclaiming VAT, says Ian Bryant, managing director of Quipsound
European VAT Recovery in London. ''The main reason people are not reclaiming
VAT is that they can't be bothered,'' he said.
VAT is a consumer tax imposed on goods and services by all 15 member states of the European Union and Switzerland, Iceland, Norway and Hungary. Other countries, including Japan, Korea and Canada, also have forms of VAT. The VAT can be as high as 25 percent in some countries -- all money that you can get back after you leave the European Union.
Unlike a straightforward sales tax, such as city and state taxes in the United States, VAT is a ''cascade'' tax - the tax man taking his bite on the ''added value'' of sales for every transaction, which is passed on to the next customer. The next customers can reclaim VAT on goods and services they have purchased. It sounds complicated - it is. It was invented by the French (who else?) and has been adopted throughout the EU. Travelers based in the EU - as long as they are registered for VAT - recover the tax on travel expenses within their own country from their local tax authorities in the normal accounting process.
The VAT year is normally January to December, with six months until the following June to submit claims. (The exception is for non-EU travelers claiming VAT refunds in Britain, where the claim period is July 1 to June 30, and the deadline for claims is Dec. 31.)
The European Union, which has just launched the single currency, the euro, is not about to harmonize VAT any time soon. It is up to each member country to determine VAT rates, conditions and procedures for reclaiming VAT within its own borders. The result is a complicated matrix of what you can and can't reclaim.
In all countries in the EU, you can reclaim VAT on all major purchases. You can reclaim all VAT in Britain (17.5%) on durable goods that are taken out of the country; Germany (16%) allows a reclaim on restaurant bills, car rental, telephone charges and entertainment; Austria (20%) allows hotel bills but not restaurants and car rental; France (20.6%) does not allow for hotels and restaurants; Switzerland (6.5%) only allows half the tax back on hotels, restaurants and car rental; Finland (22%) allows most expenses except restaurants and telephone charges; Italy (20%), Ireland (21%), Greece (18%) and Portugal (17%) allow VAT reclaims only on telephone charges - which can still add up to a lot of money; Spain (16%) allows hotel bills, and Sweden (25%) allows hotels and restaurants, but only half the tax on car rental. Allow for an average of six months for refunds - two to four months in Britain, Germany and France; one to two years in Italy, Spain and Portugal, and three years or more for Greece. Fortunately, you get more money back faster from countries like Britain, Germany and France, which boast more travelers, than the Mediterranean countries, where VAT refunds are more meager anyway.
Some vendors in Israel (and various other countries), whether you're paying for a hostel or a car rental, will waive the VAT if you pay in American currency. Ask about this ahead of time and you may save yourself some money and avoid the headaches of trying to get the VAT back later.
Select excerpts courtesy of the International Herald Tribune