Hi guys! I thought I would kick off this “Luxe 101” series after getting so many questions from friends and followers alike asking all about all different topics of luxury and luxury bags. Which bag should you buy? What is a good investment? What to look for when buying your first handbag? I understand that sometimes information is hard to come by or takes ages to find the answer to questions, so I hope that this series will be helpful and one that can be used for future reference if any of you guys ever need.
Lots of people like to go abroad and purchase their luxury items in Europe because of the VAT refund. In fact, I save my purchases if I am ever making a trip to the EU because luxury goods are not as expensive as they are back here in the US (and I am all about saving money where I can). There are also tons of personal shoppers who travel back to Europe to score better deals on luxury goods for their clients too.
To start off, let me just answer some frequently asked questions that will also help give context to the process later.
Why buy luxury in Europe? Most luxury fashion houses are based in Europe; most of them have their flagship stores in their home countries . For example, the flagship Chanel store is in Paris, France and Chanel still have lots of factories in France. And since most of their factories are based there as well, there are little to no import fees. Also, because of the VAT refund system in place, you can get extra savings on top of the already lower prices (compared to the United States).
What is VAT? VAT is the abbreviation for “Value Added Tax”. In Europe, their taxes are included in the prices you see (versus the US, where each city and state will add on their sales tax after). If you are a visitor of a European country, you are entitled to claim a portion of the value added tax back when you are returning home. The portion of the VAT refund ranges from 9 – 18% (this is a rough estimate and varies depending on country and location).
How much cheaper is it, really? For example, a medium Chanel classic flap is $5800 plus tax here in the United States (price as of February 2020). In France, the price of the same classic flap is 5150 Euros (price as of February 2020). The exchange rate ( 1 Euro = 1.10 USD) would make the price of the classic flap to be $5665 USD. That is not accounting for the VAT refund. Let’s say you get a 12% VAT refund, that would bring the cost of the classic flap to just over $5000. That’s well over $1000 after US sales tax is factored in.
The VAT Process Step-by-Step
The VAT process can be a bit convoluted if you are a first time shopper. So I’ve outlined the general steps of how the VAT process works. The process does vary, but for the most part, this has been my experience whenever I’m shopping in Europe.
- Passport. If you are planning on taking advantage of the VAT refund, remember to bring your
passport when you are shopping. Stores will need this to process your refund and the necessary
- Paperwork. After purchasing your items, the store will help you process the paperwork necessary to get the VAT refund. If they have not offered to, make sure you ask them about the paperwork (the store has to process the refund for you; there is no website or designated place to get this paperwork after you leave the store). Usually they will ask you if you would like the refund back in cash or credit. Hold on to this paperwork and keep it in a safe place
- Do not use your item(s)! I know how tempting it is to want to immediately start using your new goodies after you buy them. But in order to receive the VAT refund, the item has to be unused for export back to your home country. The idea here is because you are forgoing paying the tax, you are giving up the ability to use it in that designated country
- Airport. When you are flying out on your last stop, the paperwork needs to be checked and/or dropped by the designated office at the airport (usually pre-security). This ensures that your refund it processed and completed. Make sure you give yourself ample time to process it, as there can be lines sometimes. I like to give myself at least an hour just in case. Also, make sure your items are in your carry on and NOT your check-in bags. Sometimes items need to be checked in person
- Refund. Depending on which option you chose, your refund it processed and you should get the money back from the refund. I have only ever chosen to get the refund back as credit on the credit card I used during purchase, so I can only speak on that. Usually it is refunded back within the week, but can take up to two or three weeks for the refund to show.
VAT Process Duty Free
With all that being said, there is a way to shop without having to go through all the paper work and get more VAT refund. When shopping duty free at the airport (post-security), the VAT tax is already taken out, so the price you see is the price you pay. The VAT percentage is also higher. For example, when I was in London back in November 2019, I purchased an item at Selfridges which processed my VAT refund at 12%. I also purchased items at duty free at Heathrow and items were listed around 17-18% cheaper.
Keep in mind that this varies by airport. Some airports do not have luxury stores, so you would not be able to take full advantage of purchasing for a higher refund. In other cases, airports have limited stock so the item you are looking for or saw might not be there. For example, Chanel at Heathrow only carry seasonal pieces, so you cannot buy a classic flap there to get the maximum refund even if that was the plan.
My recommendation is that if you see something you love while out shopping, get it there instead of waiting. There is a possibility you might not be able to get it in duty free. Or if you want to try getting it duty free, I recommend calling the store itself to see if they can reserve the item or to check their stock for you when you fly out.
Other Things To Know About the VAT Refund
The VAT refund is definitely something you can utilize to save money on buying goods abroad, but there are things that you should know about VAT refunds as well that you should consider.
VAT can only be claimed on imported goods. You cannot claim VAT back on things like meals or the tax on your hotel stay. Also, this goes back to what I mentioned on not using your items before you leave. The items have to be in the same condition you purchased them in to be considered an “imported good”; otherwise, you may not be eligible for the VAT refund.
VAT can be claimed over a certain amount. There is a certain threshold you have to spend before you are eligible for a VAT refund. I’ve noticed that the threshold for VAT refunds starts at 100 pounds / 125 euros (but definitely ask just go be sure). For example, if you spend 20 euros on some cookies, they will not process the refund just because it would cost them more money to process the refund than you would have spent. So VAT is better used on more expensive and big ticket items.
You will need to pay customs fees when entering your country. For the United States, each person is allowed a $800 duty free allowance. If you spend more than $800 on goods abroad, you are subject to a 10% tax on the rest of the cost of the goods minus the allowance.
I hope you found this post helpful! Let me know if you have any questions down below and if you’re planning on shopping in Europe, what’s on your wish list!