Traveling abroad is always special whether it’s for business or vacation purpose. And shopping is an exciting part of it. Most of the countries around the world understands it very well.
And that’s why they allow tax-free shopping to encourage and attract the tourists.
But what is Tax-free shopping?
Tax-free shopping (TFS) as the name suggests is when you shop for goods in foreign land and obtain the refund of the sales tax which was collected by the retailer.
The sales tax can be alternatively described as goods and services tax (GST), consumption tax, and value added tax (VAT).
TFS does come under the national regulations such as restrictions on some type of products and minimum limit for expenditure.
One key point to note is that refunds can be claimed only on exported goods. Moreover, buying tax-free goods doesn’t mean that travelers are exempted from paying taxes applicable on their purchased goods once they land in their country.
So, this is what Tax-free shopping is. Now, just imagine you bought original Harry Potter merchandise from UK and collected all your transaction receipts.
On departure you submitted all your documents to the custom official. However, you didn’t receive any VAT refund as your handwriting was illegible to the custom official.
Yes, such kind of incidents occur due to which travelers often don’t receive any refund.
To solve this issue many companies built a tax free shopping app that makes the process of VAT refund easy. Let’s have a look at some of these companies.
Leading companies providing seamless tax-free shopping solutions
Global Blue is the worldwide leader in providing tourism shopping tax refund solutions. It’s operational in 52 countries with 305,000 tax free shopping merchants.
Apart from tax free shopping solutions it provides dynamic currency conversion in 123,000 points of sales around the world.
Moreover, they also provide intelligence & marketing services that helps their merchants to increase the brand awareness.
Alipay is a third-party mobile and online payment company which is a part of the Alibaba group based in China.
Alipay recently partnered with Global Tax Free (GTF) to launch world’s first paperless tax refund service in South Korea.
Earlier it had partnered with Global Blue to allow all the Chinese tourists to claim their tax refund directly on their Alipay account.
Planet is another company which aims to simplify the tax refund process for its international shopper.
This company is over 30 years old and is operational in 58 countries spread across 5 continents.
Apart from the big firms even governments seems to be interested in the concept of paperless tax refund.
Recently, the Japanese government keeping in mind the 2020 olympics have decided to go paperless to simplify the tax-free shopping process.
How to claim the VAT refund?
Every year many travelers and tourists leave behind their share of refundable sales tax or VAT.
For some people the refundable amount is not big enough to sustain the long process.
But in case, if you’ve done some extensive shopping then your share of refundable sales tax is surely worthy enough for you to reclaim it. So, what’s the process one must follow?
Keep your passport with you
To initiate the refund process, you must present your passport every time to you make a purchase.
Shop at those stores that follows VAT refund scheme
It’s not necessary that all the stores follow VAT refund scheme. However, most of the tourist-oriented stores do participate in it.
So, every time you purchase something, don’t forget to ask for your VAT refund.
Get all the documents
While you make the purchase, ensure that the merchant fills out all the required information in the tax-free form. It’s your duty to complete all the paperwork before you leave the store.
The process of refund may differ from store to store. For example, some store may reimburse your credit card at that instant.
Or you might have to take your documents to a third-party agency for immediate refund.
However, whichever the case is you must get your documents stamped at the border. And then mail it to the store if they never received it.
At the airport
Bring all the paperwork and arrive early
You must have all the documents and the paperwork at the airport. You need to process them before you reach home.
Now, let’s take a complex example so that it’s easier for you to understand its working.
Let’s assume that you bought merchandise in a EU (European Union) country, then you’ve to process all the documents at the last stop of EU regardless where you bought it from.
For example, you bought a t-shirt from Milan, a pant form Netherlands, and a jacket from Paris and you’re flying to home from Athens.
In such case you’ll get all your documents signed and stamped at Athens airport.
If the places where you made these purchases and the place where it’s been processed has different currencies then you will have to pay extra money for conversion.
Get all your documents stamped at the customs
At your departure point you have to get all your documents stamped by the custom officials. You must come early and prepared to stand in the long queues.
You must be aware of custom office’s location as they’re sometimes positioned before the security checkups.
At customs you will be greeted by an export officer who will stamp on your documents. He may ask you to present your purchased goods for verification.
Collect the cash
There are two ways to do it. First, if the store from which you bought the goods has a tie-up with the services such as Global Blue and Premier Tax Free then you must find their offices in the airport.
Provide your stamped documents to them and take your VAT refund.
These services take their commission but saves you from rest of the hassles. You will receive money in the currency of your country.
However, if you want it in some other currency then you have to pay the extra charges.
Secondly, if you’re not availing any such services then you will have to email the documents either from home or before you leave the country.
After then all you have to do is wait. It could take as long as months. In case, the refund cheque comes in a foreign currency then you have to pay additional fee to get it into your bank.
What are the challenges that you could face in claiming your VAT refund?
TFS can often turn out to be a tedious process. And on top of that there are chances that you might not get any sales tax refund. But why? Let’s see below.
Bought goods without paperwork
Paperwork is the most essential part in claiming your VAT. So, you must ensure that you’re having a receipt for all the goods.
However, there are few suppliers who don’t do any paperwork. Local street merchants, independent artists, and many others do not provide you with any paperwork.
Absence of custom officials
So, you got all the papers on your side for the refund. But what if there’s no official to process it? Such scenarios do occur at the airport when you see custom kiosks empty.
In such scenario there’s a high possibility that you might miss out on your VAT refunds.
So, you got all the papers and you found the custom officials at their desks. But there’s still a possibility of you missing out on your VAT refund.
The VAT refund forms have to be handwritten your handwriting is illegible to the custom officials then you might not the get your refund.
Wear & tear of paper
Apart from illegible handwriting the other factor that can hinder your VAT reclaim is the wear & tear of paper. All the receipts and forms are kept, moved, and transported to various places.
There’s a possibility that your form might get torn in the process thus making it difficult for the officials to get the required information.
We saw all the challenges and issues of tax-free shopping. Peerbits came up with a mobile application which simplified the whole process. Let’s have a look at its working.
Working of GTFS
Let’s try to understand the working of the GTFS (Get tax free shopping) mobile application in simple words.
The user first installs the application and fills all his/her basic details along with important details like bank account number, passport number, and many more.
After submission the app generates a QR code which acts as a virtual identity for the user.
Now, when the user goes to a store and shops, all his/her shopping information is stored in the database. It also stores the amount of money to be refunded.
Now, when that user goes to the airport to claim his/her refund. All he/she has to do is show its QR code.
The official at the terminal will have a device that will scan the QR code and fetch all the information on to the device.
The device’s LCD screen will display the amount of money to be refunded. At last the official will take a printed receipt from the device and hand it over to the customer.
Read More: How Much Does It Cost to Make Tax free app?
How can our solution overcome the Tax-free shopping troubles?
One of the root cause that made many users deprived of their VAT refund was the fact that custom department used conventional system of paper documents.
Usage of paper made the process slow and prone to many discrepancies.
Our solution solves all these issues by getting rid of paper. The new paperless solution offers below benefits:
With digitalization, the process becomes faster as all the data get stored in the database. The officials can recall any data at any time instead of manually finding the paper file document.
Earlier the travelers didn’t use to get their refunds because of their illegible handwriting or spelling mistakes.
Since, our system is purely paperless, it eliminates the issue of illegible handwriting.
No loss of data
The fetching all the files from one place to another often lead to wear & tear of paper. This caused loss of data that made refund dicey.
Our digital and paperless solution keeps all the data intact ensuring guaranteed refund of your VAT.
Our system provides you with a feature that will ease the whole process of VAT refund. The system creates a QR code for each user which will be its virtual identity.
All the transactions details, personal details like name, bank account number, passport number, and many more will be saved there.
This is a vital feature as now user don’t need to carry all the documents with him/her all the time. All the key data is already stored in the QR code.
Earlier the user had to carry documents of all its purchases which left him/her with a huge stack of papers.
With our solution all the purchases made from a single store or various stores of a franchise can be consolidated into one.
Claiming the refund for your VAT is still a headache for many travelers as the process is lengthy and yet uncertain.
However, the introduction of technology by many industry leaders has made the process quicker and smoother.
Taking one step ahead Peerbits came up with a tax-free shopping application development GTFS which an absolute paperless solution.
Going paperless helps in preventing human errors and making the process easier and faster.
If you liked this blog and are interested to develop any mobile application then contact us.