Brexit and the possibility of tax-free shopping

Will Brexit make tax free shopping possible for us all? Eoin O'Shea takes a look.

Visitors to the EU buying goods to bring home with them can obtain a refund of the VAT paid. The process is called, officially, the ‘Retail Export Scheme’. There are big savings to be made, too: €187 on a spend of €1,000, for example. The scheme only covers goods, and not services, and they must be capable of being carried in the traveller’s personal baggage. Goods which need to be sent by freight, e.g. fridge freezers or cars, are not covered. 

The most obvious of these tourists would be the American travelling home with gifts from Ireland in their luggage for loved ones. However, Brexit very well could give UK citizens the right to shop tax-free in Ireland and vice versa – thus considerably expanding the range of people who will be able to benefit from the scheme. So, for example, a ‘tourist’ travelling from Newry (outside the EU) to Dundalk (inside the EU) will be able to shop VAT free in Ireland, if the conditions of the scheme are met. 

The scheme only provides a refund/VAT free purchase if and when the goods are exported. Proof of export is normally done at an airport because, as of now, practically speaking, the only way a person in Ireland can directly leave the EU is on a flight. There are retail scheme booths at airports, operated by agents of the scheme, where tourists can have their export vouchers stamped and, out of hours, where they can leave their documents for future processing. 

Post-Brexit, it will be possible to leave the EU, from Ireland, by train, ferry or car (or by bicycle/on foot/on a horse) as well as by flight. How will proof of export be possible in those circumstances? It’s complicated, but it is possible (with the agreement of the retailer, who has the prior approval of Revenue) for exports to be vouched by Revenue officials, policemen, and lawyers in the tourist’s home country. 

In border areas, in particular, it is likely that retail outlets will need to consider whether the scheme makes sense for them to operate post Brexit, given that the amount of ‘tourists’ qualifying for the scheme will increase dramatically. 

The ‘tourist’ must also consider, however, the fact that, when they bring the goods back to their home country, there may be import VAT and, perhaps, customs duties to be paid if the goods are valued above a certain level. What the tax code giveth, the tax code taketh away. But, there are thresholds below which VAT and customs duties do not apply when goods are imported (€430 currently) so there may be arbitrage opportunities for the ‘tourist’ and the retailer post-Brexit.

Eoin O’Shea FCA is a practising barrister, specialising in commercial and tax law.