VAT Refund

VAT Refund 101: What is it and How to claim your VAT Refund  

The Dollar to Euro exchange rate has been very favorable for visitors to Italy over the last couple of years so you get much more Amalfi Coast or Roman holiday for your money than you used to. But did you know you could be saving even more if you take advantage of the tax-free shopping, too? It could be as much as 20% off your bill. That’s because Italy, just like its European neighbors, charges VAT (value added tax) on many of the things you’ll spend money on while on vacation. And the good news is that if you’re a non-European resident, you don’t have to pay the tax. It’s not quite as easy as just knocking off 20% at the checkout counter, but claiming your VAT refund should definitely be added to your holiday to-do list. Here’s everything you’ll need to know about tax-free shopping in Italy.

What is VAT?

Value added tax (VAT) is a state tax applied to food, accommodation and consumer goods. It’s charged at varying levels across different European countries since each territory sets its own VAT. Italy’s VAT or IVA (Imposta sul Valore Aggiunta) rate is around 20% depending on what you’re buying.

But because the VAT or IVA is incorporated into the price tag of pretty much everything you buy, you could end up leaving quite a bit more money behind in Italy than you need to unless you request a VAT refund.

Tax-Free Shopping for Tourists

So if you’re planning a shopping trip to Milan for its world-renowned fashion, or fancy a unique Murano glass sculpture as a souvenir, there are a couple of ways that you can shop tax-free.

First, look for the “Tax-free shopping” sign. Shops displaying it are already set up to make your spending simple and easy. Very occasionally, the shop will deduct the VAT at the checkout counter if you present a non-EU passport, but this really is an exception.

Even if you don’t strike it lucky with an immediate discount, the process is pretty simple: all you need to do is ask for a fattura from the shopkeeper when you pay. This is a separate invoice from the receipt, and should include your name (so keep your non-EU passport with you) and the details of how much IVA you’ve paid. It’s a little bit of bureaucracy, but will ensure your documents are correct when you come to claim your VAT refund.

You also need to ask for a blank, tax-free form from the shop keeper since you’ll need to complete one and take it to Customs at the airport when leaving the European Union.

And even if you don’t spot a tax-free shopping sign, you can still shop tax-free. Just make sure you tell the shop assistant that you want to reclaim your VAT, and keep your receipt and the fattura.

Tax free tip: before you leave the shop, make sure you have four things – your purchases (obviously!), your cash register receipt, the fattura invoice and, where available, the tax-free form.

Who and what qualifies for a VAT refund?

VAT is charged on a range of goods and services including food, accommodation, gas, clothing and jewelry. But not all the VAT is refundable and not everyone is entitled to claim it so here are the key points to remember for a successful VAT refund:

  • You must be a non-EU resident – i.e., the permanent address on your passport must be outside the European Union.
  • The goods you buy must be for personal use only.
  • Your purchases MUST NOT have been opened, worn or used before you leave the country so don’t wear that new designer watch to the Customs office! This is crucial.
  • All your unopened purchases must be in your hand luggage in case Customs asks to inspect them. If they are too big to keep in your hand luggage, contact the local Customs office before departing
  • Purchases must have a value over €154.95 – or the total spent in one shop at the same time must be over this value. It can be worth buying several things in one shop instead of spending €30 in different shops and losing the VAT refund.
  • And finally, you must be leaving the European Union within three months of the date of your purchase

Claiming your VAT Refund

So now that you have a beautiful new pair of Prada shoes to complete your outfit, you have a little bit of paperwork to do before you go home.

You will need to take your cash register receipts, fattura invoices, completed tax free form, non-EU passport and all your unopened purchases with you to the Customs office or Tax Refund agency at the airport or port from which you’re departing.

Increasingly, the office is easy to spot, but if you have a lot of purchases to declare it may be worth adding a little time at the airport just to be sure. Don’t forget, the VAT refund can be as much as 20% of your purchase price, so if you’ve been exercising your credit cards, it is worth reclaiming!

When you get to the front of the dedicated VAT refund line, you’ll need to present all your paperwork and be prepared to show your purchases if required. Assuming everything is in order, the Customs officer will stamp your papers. But you’re not done yet!

If you’ve bought your goods through shops who work with tax-free shopping agencies such as Travelex, Global Blue or Premier Tax Free, for example, you may get a refund directly to your credit card – or in cash – minus a small handling fee, straight away at the airport.

If not, you will need to send the stamped receipts back to the shop where you made your purchases; they will then refund your VAT. This will normally take 2-3 months, although it can take longer. While you’re waiting, just keep that 20% tax bonanza in mind!

Get ready to shop!

Ultimately, we all know that Italy has plenty to offer visitors, from its unrivaled historic heritage, to its breathtaking artwork and picture-postcard landscapes. It’s also renowned for its designer shopping and high fashion. Our travel experts can help you book an itinerary that incorporates all the sights and historic highlights, plus time to shop too. And as you check out the countryside, cuisine and couture, keep in mind that you could also be taking home a whopping 20% VAT refund, in addition to your fabulous trip. Or you could do 20% more shopping and get much more Italian bang for your American buck! It just takes a simple conversation in the shop, a small form and a visit to Customs at the airport. What could be easier? Buon viaggio, and happy tax-free shopping!