Tax free shopping – removing barriers to ensure competitiveness

Visitors to the EU, who are about to leave the jurisdiction for a destination outside the EU, may be afforded the possibility of buying goods free of VAT. However, the specific rules governing any refunds are established individually by each member state.

Since 2002, Lithuania has had one of the EU’s most restrictive tax free shopping regulations. These regulations included a complex list of purchase categories which are deemed non-refundable; alcohol, tobacco products, car lubricants, gold coins, precious stones, etc. In comparison to Lithuania’s regulations, many EU member States merely require that goods purchased must fit in personal luggage, and remain in their original packaging.

Lithuania also had a requirement for visitors to spend at least 55 EUR in order to facilitate a VAT refund. In comparison, the minimum purchase amount in Spain, UK, and Germany was 0 EUR, while neighbouring countries had set lower limits towards that of Lithuania, Latvia – 44 EUR, and Estonia – 38 EUR. 

The possibility of a VAT refund encourages retail tourism, attracting flows of traffic from neighbouring countries. 

The possibility of a VAT refund encourages retail tourism, attracting flows of traffic from neighbouring countries. 

This increased flow of traffic also comes as a welcome boost to other indigenous industries, such as, hotels, restaurants, transportation, and many more. As the logical follow-on of having competitive VAT refund regulations, the benefits to the entire country cannot be overestimated.

In 2018 META was hired by one of the leading TAX Free Shopping service providers with the brief of initiating a review of Lithuania’s Tax free Shopping regulation. The goal was to remove unreasonable restrictions, and allow more digital service options across the entire refund process. 

The project consisted of the following vital steps:

• Information gathering and analysis on VAT refund regulations across other EU States; the market specifics in Lithuania and its EU neighbours; the benefits of a VAT refund industry and associated digital services. 
• Preparation of information materials to advocate for change;
• Identification of the most relevant stakeholders and making contact through dialogue.
•  Ensuring involvement of the largest business associations throughout the process.
• Monitoring and advocacy of the client’s interests during the consideration of new regulations. 

In June 2020, the Lithuanian Government approved the new rules on VAT refund for visitors and tourists. The minimum purchase amount is now 40 EUR. VAT is also refunded for any goods that remained unused, in their original form, and intended for personal use. As of 1st January, 2022 , new digital services will be available to travellers at Customs posts. This ensures a decrease in manual work for Custom’s officials, and more convenience for travellers.