Value Added Tax (VAT) is a tax on goods and services in Europe. It is similar to the sales tax in the United States. You may have good reason to want to avoid paying VAT: with the standard VAT rate skyrocketing to 20 per cent as of 4 January 2011, the prospect of saving a huge chunk of your money may seem very attractive. There are several legal ways you can avoid paying VAT.
Limit your purchases to tax-free goods and services. VAT is added to a variety of consumer goods and service, but many essentials items are not taxed at all: food, postage stamps, books, newspapers and baby clothes are all VAT-exempt or taxed at a 0 per cent rate. Click on the Business link in Resources to see which goods you can purchase without paying VAT.
Purchase the item from a non-European Union (EU) country and have the item shipped to you. This option makes sense if the shipping cost is less than the potential VAT on the item. For example, a £240 necklace purchased in the United Kingdom would cost £200 outside of the EU. If the shipping cost is £10, you save £30 on the transaction.
Visit another country and take extra luggage. Pack the luggage with consumer goods: as long as you hand-carry items (like your luggage), the luggage and contents generally are not subject to taxes. (There are exceptions for large amounts of money: check with customs officials in your country for guidelines). You should take into account the extra cost of checked baggage. Ask airlines about weight restrictions.
Make sure that you are purchasing an equivalent product if buying abroad. For example, the North American version of an electronic gadget will have a different power need than the European equivalent.
Tips and warnings
- Make sure that you are purchasing an equivalent product if buying abroad. For example, the North American version of an electronic gadget will have a different power need than the European equivalent.