The taxing trials of foreign shopping, the vexing vagaries of customs duties, and how to avoid paying any of it
In foreign travel, there are few experiences that are more common and banal yet cause so much confusion as the tangled web of taxes, refunds, duties, and exemptions. The vicissitudes of just trying to figure out what you do and do not owe on a couple of souvenirs can get so complicated that most travelers throw their hands in the air, bite the bullet, and pay what all the governments tell them to. I say "governments" because there are actually two government levies involved in shopping in a foreign country-and the good news is that you don't have to pay either one of them.
Like I said, there are two times a government tries to swoop in and take a percentage of your purchases.
The 911 on the V.A.T.
The first levy is a sort of national sales tax--most countries call it a "Value Added Tax," or VAT--that the country in which you are traveling charges on all purchases. Unlike state-imposed sales taxes in the US, this amount (which ranges anywhere from 3 to 22 percent) is already included in the sticker price on an item, so you rarely realize you're paying it. Foreign nationals are usually exempt from having to pay this tax on purchases (but not on such things as restaurant meals, hotel rooms, and car rentals), but since the VAT is already included in the price, you end up paying it anyway.
The way foreign governments set this right is by allowing alien shoppers (that's you) to get that VAT refunded to them at the end of their trip by waiting in line at a counter in the airport--in the case of the EU, at the airport of the last EU country you'll be visiting. This means you must be sure you keep all receipts handy to fill out the VAT refund form at the airport (you mail this in after returning home).
However, shops that have a "Tax Free Shopping for Tourists" sticker in the window can fill out the paperwork for you when you make your purchase. Quite a number of businesses belong to this network, including tons of mom and pop operations, not just those vast souvenir warehouses near tourist sights. Your only job after that is to drop the forms and receipts off at the airport counter, where they hand you a pile of crisp dollars and shiny new coins as your refund (yes, dollars, because getting local currency just before stepping on the plane to leave the country would be silly).
One catch. To keep the line at this counter short, not every minor purchase counts for getting your VAT back. There is a minimum amount you must spend in a single store, which varies by country anywhere from around $50 to $200 (the VAT Calculator on the Web site globalrefund.com gives specifics for major countries) before the right to claim a VAT refund kicks in. That said, in those shops that honor the Tax Free Shopping for Tourist system can often do the paperwork for you even on smaller purchases.
OK. So much for VAT. You save your receipts, you stand in line at the airport, and you either get cash back immediately (in the case of having those pre-filled-out forms from the "Tax Free Shopping for Tourists" shops), or they give you the stamped form and an envelope for you to fill out while waiting to board your plane, then you mail it in within 90 days of returning home. Eventually, you'll get in the mail a check for your refund. Sometimes this takes a week or two. Sometimes this takes six months. There is no rhyme or reason, so just be patient.
I'd like to pause for a moment and explain about the "Duty Free" shop in the airport, a phenomenon that dates back to the early transatlantic flights in the 1940s but these days means mostly homebound travelers wandering the airport carrying plastic bags stuffed with cartons of cigarettes and bottles of rum.
The first scheduled transatlantic arrivals began touching tarmac at Ireland's Shannon airport in 1945; within two years, an entrepreneur named Sean Lomass had opened a kiosk he called "Duty Free" at the airport, and the idea (ahem) took off. The "duty" you are avoiding paying when you shop one of these places is the VAT, that local government tax, plus most import/export tariffs or duties.
The practical upshot is that, on heavily taxed items such as alcohol, perfume, and tobacco, duty free prices can be up to 25 or even 50 cheaper than the normal local retail price. You save a bit on other items bought at the Duty Free as well--jewelry, clothing, tchochkies--but nowhere near as much as you do on the more tax-burdened products appealing to vice and vanity.
It's a loophole merchants and governments have agreed upon, basically creating a little bubble between the security checkpoint and the ramp to the airplane where, for tax purposes, you're already considered to have left the country (this is why you can only buy from the duty-free when leaving). Note that since the EU is a single economic zone now, you can buy Duty Free only if you are flying to a country outside the EU (or are connecting a flight out of the EU that same day). That means if you have a ticket from, say, Rome to Paris, you can't do the duty free.
(This, incidentally, has done a number on the bottom lines of Northern Europe's ferry lines, which once depended heavily on Duty Free shops for revenue and have already been struck severe blows by the newly emerged competition of the Eurostar train through the Chunnel, no-frills airlines, and the 7.8km Orerunsd Bridge linking Denmark with Sweden.)
Now remember, I said you were avoiding the local taxes, duties, and tariffs on those purchases. Uncle Sam will still want to have his say about your purchases--whether Duty Free, "Tax Free Shopping," or simply stuff you bought overseas--once you get them home.
I do declare!
Once you arrive at a US airport, the US government reserves the right to charge you an import duty on any foreign purchase you bring into the country. In practical terms, they overlook souvenirs and such by allowing you to bring home a certain dollar amount of goods duty free.
The amount you are allowed was for a very long time limited to $400 per person, but it was recently raised to $800 per person from most countries, $600 for most of the Caribbean. Fine art and certified antiques are exempt. There are some funky exceptions for folks returning from U.S. possessions and territories.
There are also some fussy time-related rules largely aimed at airline employees and others who fly internationally more than once a month and return from trips abroad within 48 hours; it gets complicated, but basically those people can only bring in $200 a pop (this nasty little rule is mainly designed to keep flight attendants, pilots, etc. from become under-the-table importers/exporters).
Beyond that $800 limit, customs reserves the right to charge you a duty, starting at around 3 percent for the first $1,000 over the limit.
One way around this is, while still on the road, to mail to yourself up to $200 worth of items each day, marked "for personal use"--though this only makes sense if the postage rate will be cheaper than the duty. You may also mail up to $100 worth of items per person per day to friends and family marked as "unsolicited gifts" with a short list of the items contained and their values written on the outside of the package. Sending these loved ones an actual gift for them to keep, rather than just your personal purchases to hold on to for you, would be a nice touch.
They also have restrictions on the physical amounts you can bring in on some items, especially those vices and vanities: 200 cigarettes, 100 cigars, and a ridiculously tiny limit of one liter of alcohol of any sort--wine, beer, booze, whatever. This is in addition to the long, odd list of things you may absolutely not bring back in to the US, or need special permits to do so, such as drug paraphernalia, plants, game trophies, firearms, art and ancient artifacts, absinthe, items from embargoed countries (Cuba, Iraq, Lybia, etc.) and a long, qualified list of meats, fish, fruits, vegetables, runny cheeses, and other foodstuffs.
These are all items that the government considers "...would injure community health, public safety, American workers, children, or domestic plant and animal life, or those that would defeat our national political interests." Most of these rules have good reasoning behind them--the Mediterranean fruit fly epidemic that swept the West Coast and cost $100 million to fight back in the 1980s was traced back to a single piece of infested fruit brought home by a tourist. And let's not forget Dutch Elm Disease. Or Mad Cow.
Those are all the regs of concern to most tourists. In practice, customs officials are pretty lenient as long as you are honest and don't break the set-in-stone rules, like trying to smuggle in prohibited foodstuffs. I've flown home from international destinations dozens upon dozens of times, and I always fill out the customs declaration form they hand you on the plane before landing as honestly as I can, listing all the goods I'm bringing home with a fair estimate of the cost. I've been waved through even when declaring $100 to $200 over the limit, when carrying four or five bottles of wine (really, "one liter" is so silly), with tins of pate (technically, canned meats are on the no-no list), and more borderline cases.