What is Value Added Tax?

Old Oct 22nd, 2004, 11:45 AM
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What is Value Added Tax?

Can someone please explain the concept of the VAT? How does it work? What are the limits (where its not paid)? How does one get a refund (or is that possible?) I bought a piece of glass in Italy this summer and really got a surprise! About to embark to Austria/Switzerland -- I just want to understand how it works. Thanx.
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Old Oct 22nd, 2004, 11:57 AM
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Value Added Tax is the tax that is applied to your retail charges in the European Union (up to 19% or something like that). As a non-EU citizen, you are eligible to receive a refund on the VAT portion of all charges over 155 Euro (not sure what the minimun amount is for the British pound). When you make a purchase make sure that you ask for a VAT refund form at the desk - the store needs to provide a signature, stamp and copy of your receipt. Then before you leave the country you must present your forms to customs and they will give you a stamp (they may or may not ask to see your purchases - giant pain in the @!#).You MUST recieve the customs stamp to get the refund, so unless you got this on your purchase from Italy (remember - must cost 155 euro or more) and still have all the paperwork, I don't think you'll be able to get the refund. You can then get your refund at the airport in cash OR take the forms back with you and mail them back to Europe in a pre-stamped envelope the stores provide you with. You can choose to have them cut you a check in USD or refund your credit card in USD. Keep in mind that you're still under the wicked exchange rates when you get VAT refunds...so by the time you convert from Euro/pound to USD, it won't be as much. Doing it through the mail is a loooong process as well, but if you're a stickler for finances, it's a smart thing to do (and may help alleviate some buyer's remorse you have on vacation purchases)! Hope this helps - good luck
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Old Oct 22nd, 2004, 12:05 PM
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Value Added Tax is simply sales tax. Except unlike in the US - where the tax is added on top of the listed price - it is already included in the price you see.

If you spend enough money in any one place for something you are going to be taking out of the country/EU (not using there) you can apply for a refund - as described above.
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Old Oct 22nd, 2004, 12:08 PM
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I'm curious as to why you were surprised. As previously stated, the price shown (except on computers, and cars - usually) includes VAT, if it was expensive, it was expensive for other reasons.
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Old Oct 22nd, 2004, 01:11 PM
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OK Posh/folks let me see if i have this right:
If an item costs 200E. It will have on that item that so much (say 20%) is VAT ergo $40. But I pay the store 200E. I am entitled to get a refund of 20% (approx) of 45E (200-limit of 155).
To do this I get a form from the store, stamped, signed and receipt copied. At the airport, customs will give me a stamp(?) or stamp something I already have? and I may possibly have to show them the 200E item. At that point someone in the customs/airport area can debit my credit card (if i used it to buy the item), for the refund.
I dont like the idea of getting cash and certainly dont want to come home with paperwork that I have to send back.
A couple of questions: Suppose I buy 4 items in the store totaling 200E. No item is over 100E. Is the VAT refund figured on each item (and therefore doesnt meet the 155 limit and qualify) or the total bought at that store?
Posh --- I agree that this sounds like a royal pain in the ...!! I do appreciate your help - but Im still a little confused.

I may be wrong about this but I think I remember my piece of glass was somewhere in the neighborhood of 110E, and the shop keeper added another 30E that he called VAT. I do remember his telling us that if we spent another 30E in his store we could get some percentage refunded. Hence the surprise! Did I just not get kissed?
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Old Oct 22nd, 2004, 01:40 PM
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The amount of tax included in the purchase price will vary by country and category of merchandise (e.g., low or none on children's clothing, high on jewelry). The minimum store purchase also varies by country, in Denmark it is 300 DK (roughly $50) but in other countries it may be significantly higher, 100 Euro or more. If you buy items at several counters in a department store, you can show all the receipts to the final clerk, who will write the VAT form totalling all the purchases from that store on that day.

Shrink, the situation you discribe with the Italian glass does not sound quite right to me. The shopkeeper would not add VAT because it is included in the price everyone pays. If the price marked was 110, perhaps 20 of that would have been refundable to you as VAT if you had spent enough to bring the total to the Italian minimum and had done all the paperwork before you left the EU.
Nothing can be done once you have returned home. Just be fully informed about the system before your next trip.

The prodcedure for obtaining the refund as you leave the EU is explained in the website of the company that processes refund claims in most nations that have VAT:

http://www.globalrefund.com/

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Old Oct 22nd, 2004, 01:46 PM
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The VAT in Italy for your piece of glass should be 20% and is usually included in the posted price, not added on at the cash register. So, if your glass cost 110E shouldn't that have included the VAT? Plus, 20% of 110 is not 30 in any case.
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Old Oct 22nd, 2004, 02:22 PM
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So this is why Europeans don't tip - they have VAT instead!

And according to Shrink - you get kissed? Hey, I'm flying to Europe!
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Old Oct 22nd, 2004, 02:31 PM
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Europeans just don't tip in the fashion that Americans do.
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Old Oct 22nd, 2004, 03:24 PM
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Shrink-

Ok - the price tag you see on any retail item in Europe already includes the VAT and is not called out anywhere, so there's no adding up extra at the register (I'm with the others - the store keeper 'adding' the VAT at the register sounds shady). They sign it, bless it, give you a receipt in an envelope and you're done. BTW, you can still get it if you have many items at the same store that add up to 155 euro or more, too. Then, when you get to the airport (or sometimes stand alone customs office in the city), customs looks at your forms and stamps/signs it again. Now you're set - either go somewhere in the airport to get the refund, or send the forms back thru snail mail.

Got it? I know, it's a cluster when you've never done it before. I went crazy shopping my first time in London and was all anxious about keeping my items in their original bags - not packing them - and I schlepped all this to Heathrow and no one even looks at them. So, its a toss up on that part of it.

Best idea is to follow kayd's advise and visit the website!
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Old Oct 22nd, 2004, 03:26 PM
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I got a VAT refund last trip to Paris. Gallerie Lafayette was the only place I spent enough money for them to do the paperwork. Also, they have an office in the store that does the paperwork for you and that made it really easy plus they gave a 10% visitors discount, so that worked for me. Everything was ready to go, so just went to the VAT window at the airport and then dropped the paperwork in the mail there. No one asked to see my stuff, but remember, they CAN ask and if they do, you'd best have it with you. I got the refund quickly and it was 66.00. Now I'm not so rich that I sneeze at 66.00 but in the "big picture" I'm not sure I'd worry about it. I bought a lot of other things that didn't amount to enough for the store to do the paperwork,and if I was the one that had to sit and fill out all that paperwork, and not have someone do it for me...lazy lout that I am, I'm not sure I'd "go there", so you just have to use your judgement to see if it's worthwhile for you.
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Old Oct 22nd, 2004, 03:57 PM
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Posh Spice,

how is David?
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Old Oct 23rd, 2004, 05:30 AM
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Actually, the VAT is not exactly the same as a sales tax, though to the final consumers (us) the effect is the same.

Value Added Taxes are added to the cost of goods at each stage of production or transfer. But the tax is not actually paid at each stage--it is passed on to the next company/individual in the production/transfer process--and the amount of the tax owed grows at each stage. Of course, that means that the full value of all the little VATs added up are ultimately paid by the final consumer--you and me.
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Old Oct 23rd, 2004, 11:20 AM
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OT -
Becks and I get on quite nicely...when he's not canoodling with the help
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