Israelis Forgo Billions in VAT Refunds Abroad Annually
Millions of Israelis traveling abroad are failing to claim significant Value Added Tax (VAT) refunds on their purchases, potentially leaving close to 1.5 billion shekels (approximately $400 million USD) unclaimed each year. This figure, an estimate that has risen due to increased travel and product prices, represents potential refunds that tourists are entitled to when they purchase goods in European countries and export them. The process involves paying the full price, including VAT, at the point of sale and then applying for a refund, which typically amounts to a percentage of the VAT paid, after deducting administrative fees. For example, a purchase of 1,200 euros in a country with 20% VAT might result in a net refund of 120 to 150 euros, or about 500 to 600 shekels, after fees. A family spending 2,000 euros in Italy, where VAT is 22%, could receive a net refund of 230 to 280 euros, which could cover a meal or part of their accommodation costs.
To successfully claim these refunds, travelers must take specific steps. Firstly, they need to request a Tax Free form at the store during the purchase, providing passport details. This form is crucial, as a standard receipt is usually insufficient. Different countries have varying minimum purchase amounts required to qualify for the refund, so it is advisable to check these rules beforehand. Secondly, the purchased items must be presented to customs officials in their original condition, as they are intended for export. Using items like a newly bought bag or shoes before leaving the EU can lead to complications. The final step occurs at the airport, where the Tax Free form needs to be validated by customs, often through digital kiosks, before checked luggage is handed over. Travelers in transit within the EU must ensure validation at their final point of departure from the bloc.
Additional factors can affect the refund amount and process. Choosing between cash or card refunds can impact the net amount received, with cash often incurring higher fees. Currency conversion rates can also reduce the final refund. It's important to note that the VAT refund system differs in countries like the UK, where the standard EU tourist refund does not apply. In the United States, sales taxes vary by state and locality, and tourists generally do not receive refunds. Online purchases also have different implications; items shipped directly from a seller abroad to Israel may have local VAT deducted at the point of sale, with Israeli import duties then applying. If an item is ordered online to a hotel in Europe, the traveler might not receive a Tax Free form.
Furthermore, claiming a VAT refund does not exempt the item from Israeli import taxes. Israel has a standard personal import exemption of $200. Items exceeding this value, even after a VAT refund abroad, may be subject to Israeli customs duties upon return. Therefore, while Tax Free refunds offer a significant saving on purchases, they should not be viewed as a way to make expensive items entirely tax-free. Despite the complexities, the potential savings are substantial, especially for families making multiple purchases. By understanding the rules, requesting the correct forms at the time of purchase, and completing the customs validation process, Israelis can significantly increase the number of refunds they claim.
