How to Avoid Paying VAT When Making Card Payments

When purchasing goods or services across borders, VAT (Value Added Tax) is often automatically included, especially within the European Union. However, there are legitimate ways to avoid or reduce VAT charges when paying with a card. Here are a few methods commonly used for reducing VAT costs.

1. Purchase from VAT-Exempt Countries or Sellers

Third Countries (Non-EU): Purchases made from countries outside the EU (like the United States, Switzerland, or Norway) typically don’t include EU VAT. However, be aware of any customs or import fees that may apply upon entry to your country.
VAT-Free Sellers: Some sellers, particularly large online retailers, offer products without VAT for international buyers. Ensure that the merchant you’re purchasing from can provide VAT-free sales and request an invoice excluding VAT.

2. Register for VAT Exemption (for Businesses)

VAT Registration for Businesses: If you’re a business owner registered with a VAT number in your country, you may be eligible for VAT-exempt purchases under the “reverse charge” mechanism. This rule applies primarily to business-to-business (B2B) transactions within the EU.
Provide VAT Details at Checkout: Ensure that you provide your VAT registration number when making online purchases; the seller can then apply the reverse charge mechanism, and VAT will not be added.

3. Utilize Duty-Free Shops

Travel-Related Duty-Free Purchases: When traveling internationally, you can make purchases at duty-free shops located at airports, where VAT is typically not applied. This exemption applies mainly to goods like electronics, cosmetics, and luxury items.
Check Duty-Free Limits: Be mindful of your home country’s import limits for tax-free goods when returning to avoid additional customs charges.

4. Use VAT Refund Services for Personal Shopping

Tourist VAT Refund: If you’re shopping in a country where you don’t reside, you may qualify for a VAT refund. Make sure to request a tax-free form from the seller and follow the instructions to get your refund at the airport or through VAT refund service providers.
Dedicated VAT Refund Apps: Some apps and services, like Global Blue, offer VAT refund services to non-residents shopping within the EU. They simplify the refund process by handling documentation and issuing refunds directly to your payment card.

5. Leverage Business Expenses and Deductions

Business Card Expenses: When making business-related purchases, it may be possible to reclaim VAT as part of your business expenses. Check with your local tax authority on the process and eligibility for reclaiming VAT on business purchases.
Deductible VAT: In some cases, VAT paid on essential goods or services for your business can be deductible in your tax filing. Consult with a tax advisor to maximize your VAT deductions legally.

6. Online Marketplaces Offering VAT-Free Options

Marketplaces with VAT-Exempt Sellers: Some online marketplaces have sellers who offer VAT-free options. For example, digital goods or services purchased from certain non-EU providers may be VAT-free.

Conclusion

Avoiding VAT when making card payments is possible with the right approach. Whether you’re a business or an individual, using VAT exemptions, refunds, and duty-free options can help reduce these charges legally. Always stay informed about VAT regulations in your country and consult tax professionals to ensure compliance and maximize savings.