VAT 101

[Guest]

Gentlemen:

Could someone explain just what is it, how is it used, when is it used and from where are the forms obtained?

Thanks in advance.

KC

[Guest]

In lieu of hard information, here's my understanding:

VAT is effectively a sales tax charged (notably) by European governments. It is a tax on "value added," so it gets baked into your purchase every time a component part changes hands.

If you buy something for cash, it will have that amount included. As opposed to the U.S., where prices are "$XXX plus tax."

If you are an American or other foreigner not subject to VAT and you don't wish to pay it, you usually have two routes. One is to have the item shipped home to you. Many establishments will refund (or not charge) VAT for that sort of transaction.

The other is to carry it home with you, but get a form from the retailer with their certification of the item's cost. You carry the item and the form through airport security, a nice lady at the desk verifies that you are indeed carrying it out of the country, stamps the form, and you then mail it to some central clearinghouse. At Heathrow, there is a mail box right behind the queue at the desk.

Depending on which option you ticked off on the form, you will either get a check or a credit on your charge card.

You will, however, be liable for customs duty either way. In many cases, duty will be about the VAT amount.

Concordia

[Guest]

My experience in other regions has been quite different.


Despite asking for a VAT form, none were provided. Perhaps I was a bit naïve, but I never bothered to review my transaction receipt. Is it possible that I may have been overcharged? Alternatively, could the retailer, to avoid tedious paper, have deducted the VAT charge without my knowledge?

KC

[Guest]

... could the retailer, to avoid tedious paper, have deducted the VAT charge without my knowledge?

or omitted the tedious paper and charged the VAT anyway.

The reclaim forms are a pain, and they usually have some sort of charge for the clearing house. So on smaller purchases, you won't necessarily get this kind of service.

[Guest]

For in-person purchases: Each country has a different minimum purchase amount for which you can request a VAT refund. I believe in the UK it's now 95 pounds, but I'm not sure. In France, it's 175 euros. These amounts are per store, per day. Once you have the VAT refund form, you must enter certain personal data and have the forms stamped at your last transit point in the country (or in the case of the EU, your last transit point in the EU), then drop them in the mail.

If you are mail ordering items from outside a country, there is no minimum for VAT deduction. However, some retailers don't have the ability (or desire) to remove VAT from purchases.

RJ

[Guest]

Truely helpful and informative responses.

Theoritically it all sounds great when conducting business with established retailers, but the practical application disappears when, for instance, one commissions from smaller unknown artisans.

Relative to VAT principles, any best management ideas/suggestions for consumers encountering the second example?

Thanks.

KC

[Guest]

Ask for ex-VAT prices and ship directly.