It seems like the VAT on a car rental in Italy is about 20% of price. Has anyone filled out form(s) to be reimbursed? Looking for cheap rental in October out of Milan airport. Thanks, Sasi

Car rentals don't qualify for tax refunds.

Only goods taken out of the country(not used within the country) qualify.

Sorry.

I was just told by autoeurope that VAT:

"is not refundable for US clients because it's a service, not a good."

Too bad, sasi.

VAT is not refundable unless you remove the goods from the EU. Rentals are service.

Those good deals with places like AutoFrance for "lease" plans for non-European citizens are all about VAT. Essentially because the car is titled in your name (a brand new car) you are saving the cost of VAT because you are exempt from it on purchases. But more importantly, the car company can then resell the almost new car to a rental agency or someone else and they also save the VAT as there is no VAT on "used" cars. Unfortunately those plans are only good for rentals of a minimum of 17 days.

Patrick, how does that work legally? All VAT regulations I've seen require for a refund that it be purchased goods for personal use AND that it be removed from the country. That doesn't seem to apply in the leases you mention.

Hi Christina,

Without knowing anything about this scheme whereby rich plutocrats escape paying their fare share of the taxes that the poor proletariat have squeezed from them so that their children starve in the streets and their wives have to resort to prostitution, or worse, I can guess that the scam is for the "purchaser/leasee" to take title for the purpose of exporting the car, returns it to the dealer (read crook), who arranges for export and then sells the car on behalf of the "buyer/leasee" after said accomplice has left the country.

(Wasn't that a wonderful sentence?)

My English teacher, who seemed to break into a rash every time she encountered a run-on sentence, would WHACK you, ira! LOL

Thanks everyone for bringing me up to date on what VAT means! We won't be using our car long enough to lease. Actually, we will rent a compact at Milan airport, travel around, then pick up a mini-bus/van in Florence when our group of four increases to six! The only van we find on the web is a 7 passenger Usslyees (sp) and they are so expensive! Any help finding something cheaper that would work for six people would be helpful! Thanks again everyone, Sasi

Dear Brimham,

That was *not* a run-on sentence. However, "returns" should have been "return".

Christina, the way I THINK it works is that when we do one of those leases, I know we fill out a fair amount of paper work in advance. The company that does the leases for Peugeot (Auto France) is called Sodexa. They do all the paper work and essential they title the car in the name of the non-European leasee. Apparently they do the work on claiming and and then holding the VAT refund. I know that I never see the refund, but then I've never paid the VAT on the purchase price anyway. Renault has the same type of program and it works the same way. I suppose other European auto manufacturers also have these plans. I do know that it is all legal, but frankly is sort of taking advantage of a "loophole" in the system.

On a similar note I do know that a retail company will handle the VAT paperwork for a product that we might have shipped out of Europe. Although the car is not being shipped out, it is being returned there and maybe therefore it is then that the VAT payment becomes "cash" for the leasing company.

And Ira there are a million tax "loopholes" being taken advantage of everywhere. One in the US is that interest payments on "home equity" loans is a tax deductible expense. I know many people who buy luxury items or borrow money on their home equity accounts for things like vacations, and then deduct the expense of that interest from their taxes. I guess you would call them "crooks" too?????

Oh please...I do that all the time...I don't want to be a crrok!

sasi - back to you last question (while the others debate tax laws)

You are not goping to find any cheap vehicle large enough for six adults. Even that 7-passenger van will be a tight fit if you take too much luggage.

It is usually cheaper (sometimes a LOT cheaper) to rent two small cars instead of one huge one.

Plus in many of the places you will be driving a small car is a lot easier to navigate throught the tiny roads/villages. Having 2 cars gives you more flexibility - if 2 or 3 want to go one place while the rest want something different you can work it out.

Look into renting two cars.

I liked your sentence, Ira. I figured it was somehow legal as it is so wellknown that authorities must know they are doing this. I expected the lease would be in the foreigner's name, but since the car wasn't removed from the country, I didn't see how you could get a VAT refund. And still don't, but maybe they have special rules for cars.

Thanks, Janis, for the two car suggestion. I think that's the route we are headed. Incidentally, if you aren't familiar with a Fiat Multipa, it carrys 6 people comfortably, but when we rented one in 2000, we just were able to get our luggage in! We really liked the car, tho, you sit up high and it's great for sightseeing. Sasi