Tourists complain about months’ delay before receiving VAT refunds

A number of foreigners have contacted MaltaToday to complain about the VAT refund process, which is applicable for non-EU residents travelling to countries outside the EU from Malta.

While most major cities in EU countries have customs offices at their airports and ports where non-EU residents can receive an instant refund in cash before flying or sailing away, travellers leaving Malta who apply for a refund have to go through an arduous bureaucratic procedure and only receive a cheque after three months.

A non-EU resident who flies to Malta frequently told MaltaToday, "Recently, when flying out of Madrid, I was paid my VAT refund on the goods I purchased at the airport there and then, after being informed by the shop attendant about the scheme."

However, despite flying to and from Malta frequently, the non-EU residents who spoke to MaltaToday said that they were never informed of the scheme when leaving Malta and only got to know about it after flying home from other EU countries.

Non-EU residents are entitled to get a refund of VAT paid on goods purchased during their stay in the EU, provided that the goods are produced for customs on departure from the EU, together with the VAT refund documents.

Moreover, documents are also available in a number of outlets in the EU, and refunds can be paid directly by the merchant, rather than the customs service. The most common method of getting a refund is by visiting customs offices at airports or seaports; and refunds are either paid in cash or transferred to credit cards instantly, once the necessary documentation is complete.

According to the non-EU residents who contacted MaltaToday, the process at airports in most EU countries, such as Austria, France, Italy, the Netherlands and Spain, is quick and efficient. However when they apply for a refund in Malta, it can take months for them to receive their refund.

"This protracted process discourages most non-EU citizens flying outside the EU from applying for a refund, and they give up on receiving the refund which is rightfully theirs," another non-EU resident said.

Asked by MaltaToday why this service is not available at the Gudja airport and the Grand Harbour seaport, a finance ministry spokesperson said, "Currently there are no such cashiers or offices at MIA or the seaport which offer this service. Such a service is already being adequately provided, partly by customs (who control the goods and receipts upon departure of the traveller) and the VAT Department, where once such applications are collected from the airport or seaport, they are processed and referred for the issuing of the refund cheque."

High refund threshold

In order to be eligible for a refund, travellers must present their non-EU passport, and the goods must be exported from the EU within three months of their purchase. Furthermore, each EU state sets its own threshold, and Malta has one of the highest, if not the highest threshold within the 28 member states.

The law says that VAT refunds in Malta "only apply to goods where the value of such goods purchased from a single registered establishment as shown on a single receipt is not below fifty-five euro (€55) and where the total value of goods purchased as relating to one departure from Malta to a final destination outside the European Community, in terms of regulation 3, is not below three-hundred and fifteen euro (€315)."

Compared to the rest of Europe, the total value of goods threshold is by far the highest, with a number of countries, including Germany and the UK, applying no threshold at all (see table below).

Last year alone, the total number of non-EU residents who travelled from the Malta International Airport to non-EU countries stood at 115,982. The Malta International Airport's revenue in the retail and property sector increased from €12.6 million in 2011 to €14.1 million in 2012.

Information provided by the VAT Department shows that in 2012, it paid €518,614 in VAT refunds. The figures show that the total payments are on the increase year after year. In 2008, the VAT Department paid €174,898 in refunds. It paid €363,195 the following year and €403,401 in 2010.

There was a small dip in 2011, with €378,296 paid in VAT refunds, and a surge in 2012, with over half a million euros paid.

The process

A finance ministry spokesperson explained that any non-resident traveller who has been in Malta for a period of less than six months is eligible for a VAT refund on goods purchased in Malta.

The goods have to be taken out of Malta by not later than the end of the third month following that in which they were purchased. Travellers "need to compile an application form, have the goods and the relative receipts examined by a customs officer at MIA and the seaport, have the application endorsed by the customs officer certifying that the goods are leaving Malta, attach the relative receipts and post the application form in a box placed for this purpose before boarding."

The forms are then collected by the VAT Department and processed. An administration fee is deducted from the claim; at the highest it is €23 or 4% of the amount claimed.

Once approved, the refund is effected by cheque in the currency indicated by the applicant in the application form. According to the ministry spokesperson, "on average the refund is paid within three months."