Travel Advice -  VAT, a tax you should know about

Most of us do not give much attention to paying taxes on goods that we purchase. European sales taxes are often much higher than those we pay in the U.S. and Value Added Tax (VAT) is normally rolled into the price on the tag of the item.  In order to appreciate the expense of the item, you need to know its cost and the VAT.

• When shopping abroad, be sure that you know how to price goods by converting the local currency to its equivalent value in U.S. Dollars (see our article on currency conversion).
• Be sure to consider taxes that apply to the purchase price of the item being acquired.
  •  Value Added Taxes exist in most European countries but are called a bewildering variety of names (France = TVA, Italy = IVA, Germany = UST, etc.). 
  • Value added tax rates range from ten to twenty-five percent of the purchase price and the tax rate varies by purchase type (goods, hotels, car rentals, etc.).

It is important to note that the pricing structure of a product that you want to purchase may not be the same in different markets due to competitive pressures. Purchasing something in Europe where the item is manufactured may be more expensive than the price of the same item in the U.S. Before you leave home do some research and determine whether you can purchase the product at a lower cost in the U.S. (see our article Do the research).

In addition, you need to consider whether purchasing the item in a duty free shop might be of benefit to you (see our article on  Duty Free shopping).

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