The digital age transforms tax free in Europe

28-06-24

Tourists' spending during their trips is a crucial indicator, often more relevant than the number of visitors itself. Tourism, seen from an economic perspective, represents a significant source of revenue for both businesses and administrations. An important incentive for tourists from outside the European area is the VAT refund on certain products, known as Tax Free. Traditionally, this process was tedious and bureaucratic, but digitalization has simplified and accelerated refunds, transforming the landscape.

Those retailers that have adopted innovative technology solutions to streamline the Tax Free process are at a competitive advantage. Digitization enables a faster and more efficient shopping experience, which can translate into higher sales. This summer is expected to see a significant increase in consumption in Europe, driven by events such as the Paris Olympics and the seasonality of tourism. Massive tourist arrivals could especially benefit Spain, due to its proximity to France and its popularity among Latin American travelers. In France alone, the economic impact of tourism this summer is expected to reach 3.5 billion euros.

Contacting leading global payment services companies, they agree in projecting an optimistic outlook for merchants in the coming months, based on the solid growth of the tourism sector in Europe, and innovative solutions that promise to revolutionize the process of tax refunds and VAT reimbursement, benefiting both merchants and international buyers.

These digital processes simplify and streamline VAT refund processes by enabling greater efficiency and faster processing of refunds. Digital systems facilitate the collection and verification of information, reducing waiting times and minimizing errors. In addition, the rise of e-commerce has increased claims for VAT refunds on online purchases.

VAT refunds are especially popular in sectors such as luxury, fashion, technology and electronics. Countries such as France, the United Kingdom, Germany and Japan are renowned for their efficient Tax Free shopping programs, which attract numerous tourists. 

Shopping tourism is a growing segment, especially among Asian tourists, known for their high propensity to spend. Chinese tourists, in particular, have a significant economic impact. For example, during the first two months of this year, Spain received more than 101,000 Chinese visitors, 19% more than the previous year, with an average expenditure per person of 3,000 euros, considerably higher than that of European tourists.