utu is proud to present its first Guest Contributor, Royce Jaime, who has succinctly simplified the complex world of tourist taxes and fees to help travellers best manage their finances.
International tourism is set to make its comeback this year. Reuters found that industry giants’, including Marriott, Hilton, and Airbnb, quarterly results and revenue reports are exceeding expectations. Meanwhile, travellers themselves are understandably embarking on longer and more far-reaching trips to shake off the last of the cabin fever from the pandemic.
With more countries lifting travel restrictions, you might be thinking: this is the time to go. Understandably, your first order of business may be to organise your finances. Yet though you might be financially savvy in your home country, different financial regulations across the globe may have you reeling when it comes to spending your money abroad. This is especially true when it comes to taxes. Here are some travel tips when shopping abroad.
Tourist VAT refunds
Though many countries offer VAT refunds, availing them can be an inconvenient, time-consuming process that reaps little rewards. It’s considered to be so for a few reasons. For one, availing of VAT refunds necessitates the collection of all pertinent receipts and their presentation at refund counters, which can be a hassling and time-consuming process for most travellers. Added to this is the fact that returns are minuscule, despite a hefty refund percentage in the range of 20%. This is because availing of these refunds requires going through a traditional VAT refund operator, and they tend to take a cut from consumers like you instead of the retailers who can afford it. What’s more, it can take months to receive whatever little you’ve saved.
Instead of avoiding this service completely, consider increasing your tax refunds instead using the utu Tax Free Card, introduced by utu – the only company to reward you for your VAT refunds. By receiving your refund from any VAT refund operator on utu Tax Free Card, you can earn 25% more on your VAT refund across 50 countries when you choose to be refunded in rewards. utu has tied up with some of the largest loyalty programs in the world including Emirates’ Skywards, Qatar Airways’ Avios, and Singapore Airlines’ KrisFlyer to name a few.
Other types of tax:
- The tourist tax
Not to be confused with Value Added Tax (VAT) for tax refunds, this is another important tax you need to know about. Tourist taxes are usually charged indirectly through the purchase of products and services made in the realm of the tourism industry, such as hotels stays. Tourist taxes are meant to help the government offset the social and environmental costs of overtourism. They’re also usually levied on top of any VAT you may have to pay on applicable products or services. When budgeting for your trip, The National News thus recommends doing your research to determine the amount of tourist tax you have to pay and how often you need to do so. This way, you can plan and support sustainable tourism without breaking the bank.
- Customs duty
If you’re planning to bring anything in or out of another country, you’ll need to know their customs duty information. This is a tax levied on any goods that travel across international borders and is meant to protect local goods from foreign competition. Different items are subject to different percentage rates. You’ll usually be given an allowance to buy items without paying customs duty. Such items include those sold at duty-free shops at the airport. Once you exceed this allowance, duty rates apply. However some products, like alcoholic beverages and tobacco, are “dutiable” or require payment under certain conditions — even if they fit in your allowance. Given the limited refunds you’re likely to get, you’ll again need to factor both into your budget if you plan on bringing anything new home with you.
Currency rates tend to fluctuate constantly due to multiple factors like current political events and a country’s economic health. This is exemplified by the forex charts on FXCM. These show popular currency pairs like the Euro and US dollar, their prices, and red or green highlights often change by the second to show changes in value. That’s why it’s wise to also keep an eye on currency rates when factoring taxes into your holiday budget. When converting cash for transactions that don’t accept cards, ordering your money in advance will help you convert money when your currency is stronger than that of the country you’re visiting — and it ultimately gives you the best deal for your money.
Some best practices
Though all these taxes can add up during your trip, there are some best practices you can follow to save money across the board. For example, you can observe some best practices for holiday budgeting like travelling during off-peak seasons and scouring daily deal sites like Groupon for relevant coupons. Apps like Revolut can give you cashbacks on accommodations and even allow you to convert currencies with no hidden fees. Travelling with friends means you can split the bill in a variety of situations, while opting for hostels or rentals like Airbnbs can be cheaper than booking a hotel room. You can also craft an itinerary that avoids tourist-heavy spots and bloated prices, which gives you the added bonus of discovering hidden gems at your chosen destination. Finally, download the utu Tax Free app and activate the virtual utu Tax Free Card to get the biggest refund possible from virtually all the products you’ll be paying VAT on – simply tell the shop or input your own utu Tax Free Card’s number on any tax free form or kiosk.
Financing your trips can be a headache. By ensuring you’re well-versed in the taxes involved, you can better focus on the fun and relaxation that travelling should be all about.
By: Royce Jaime