Owais Crawford
When it comes to airport taxes, travellers often wonder about the VAT implications. VAT, or Value Added Tax, is a tax levied on the purchase of goods and services, and it is important to understand how it applies to airport purchases and travel. While VAT is generally included in the cost of goods and services, there are opportunities for travellers to claim VAT refunds at airports, especially for duty-free purchases. Additionally, certain jurisdictions have specific taxes, like the Air Passenger Tax (APT) in South Africa, which applies to international flights departing from the country. Understanding the specific regulations and eligibility criteria for VAT refunds is crucial for travellers seeking to maximise their savings.
VAT on Airport Taxes Table
| Characteristics | Values |
|---|---|
| VAT on domestic air transport | Political issue for debate within each jurisdiction |
| International air transport and related services | Should be zero-rated and totally refundable |
| VAT on the cost of flights | No VAT, but Air Passenger Duty (APD) applies |
| APD cost | £7 to £224 per flight |
| APD for private passenger planes or charters | Higher charges |
| APD for long-haul flights from Northern Ireland or flights from the Scottish Highlands and Islands region | Exempt |
| VAT refund at airports | Available |
| VAT refund process | Present eligible receipts and goods for inspection, receive refund in cash, check, or card |
| VAT refund time limit | Varies, often several months |
| VAT refund requirements | Minimum spending requirements met, original receipts kept, proper VAT invoice provided |
| VAT refund location | VAT refund desk at the airport, customs desk, or designated tax refund point |
| VAT refund inspection | Customs authorities may inspect items to verify they are leaving the country |
| Country-specific example | South Africa: 15% VAT on non-exempt products and services |
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What You'll Learn
VAT refunds on duty-free shopping at airports
When shopping duty-free, it's important to understand the nuances of the programme to maximise your savings. For instance, duty-free retailers are operated by private companies under concession agreements, so the selection of merchandise may be more limited compared to tax-free shopping, which is run by refund agencies. Additionally, duty-free shopping may be subject to specific rules and limitations, such as different refund rates or requirements for certain items like jewellery or luxury goods.
To claim a VAT refund on duty-free purchases at an airport, travellers should follow these steps:
- Make eligible purchases: Ensure that your purchases meet the minimum spending requirements for VAT refunds.
- Keep your receipts: Retain original receipts that clearly indicate VAT has been paid on the items. The retailer should provide a proper VAT invoice.
- Request a VAT refund form: Ask the retailer for a VAT refund or tax-free shopping form, and complete it with accurate details, including your contact information.
- Visit customs: Before checking in for your departure flight, go to the customs desk or designated tax refund point within the airport. Have your purchased items, receipts, and passport ready for inspection.
- Inspection: Customs authorities may inspect your items to verify that they are leaving the country with you.
- Validation and refund: Once your documents are validated, you may receive your refund in cash, cheque, or credit to your card, depending on the country's procedures.
It's important to note that VAT refund rules can vary from country to country, so travellers should familiarise themselves with the specific regulations of their destination. Additionally, there is usually a time limit for claiming VAT refunds, so be sure to apply within the specified timeframe from the date of purchase.
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Air Passenger Tax (APT)
In 2000, the South African Minister of Finance announced the introduction of the Air Passenger Tax (APT) on chargeable passengers departing from airports in the country to international destinations. This tax also applies to charter companies. It is important to note that APT is not applicable to domestic flights and only comes into effect for passengers leaving on international flights.
Operators (airlines), registered agents (those acting on behalf of an operator), or charter operators are responsible for paying the APT to the South African Revenue Service (SARS) on a monthly basis. This payment is made after reconciling the passenger manifests. It is mandatory for all operators (airlines), duly appointed agents, and charter operators to register for this tax at the Customs and Excise Branch Office at OR Tambo International Airport.
The South African Revenue Service (SARS) has implemented a new system for APT submissions and payments as of September 15, 2023. Taxpayers are now required to use new APT tax numbers to register and activate the tax type on the eFiling platform. This platform will be the primary method for submitting APT201 returns and making associated payments. However, clients who do not use the specified banks will continue to submit their returns via email to the Customs and Excise APT Team at OR Tambo International Airport.
Certain categories of airline/airport employees are exempt from APT when they are engaged in specific duties on a flight or within 72 hours of the flight ending. This exemption also applies to employees who begin a return journey within 72 hours after performing these duties, provided they are returning to their usual base. However, when these employees are travelling as passengers and not working, they become liable for APT.
It is worth noting that children below the age of two who do not have a separate seat allocated before boarding are also exempt from APT. Additionally, passengers in transit through South Africa who do not officially enter the country by passing through immigration are not considered chargeable passengers for APT purposes.
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VAT on domestic air transport
In the UK, passenger transport in a vehicle that is designed or adapted to carry ten or more people is zero-rated for VAT. This means that VAT is equivalent to zero, and you cannot claim it back on things like train or plane tickets. This applies to both domestic and international travel.
However, there are certain types of flights that are not zero-rated and are subject to VAT at the standard rate of 20%. These include:
- Pleasure flights where the aircraft departs from and returns to the same airport without an advertised landing and disembarkation of passengers at another airport.
- The transport element of park-and-ride schemes designed to reduce traffic congestion in city centres.
- The transport of parachutists or divers when only transportation is provided.
- Transport services to places of interest that are free to access, such as national parks, seaside resorts, historic towns and villages, canals, and lakes.
It is important to note that Air Passenger Duty (APD) is a separate tax charged by the government to the airline, which is usually incorporated into the price of the ticket. APD is added to all flights departing from the UK, and the cost depends on the distance to the destination and the class of travel. Domestic flights are particularly affected by APD, as both the outward and return journeys are taxed.
Additionally, transport between a car park and an airport or cruise terminal provided by the car park operator or a connected entity is subject to VAT at a reduced rate of 5% if it is on a cable-suspended vehicle with less than 10 seats, such as a chairlift or gondola.
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VAT on international air transport
The VAT treatment for passenger transport is a complex issue that varies across jurisdictions. In the UK, passenger transport in a vehicle designed or adapted to carry ten or more people is generally zero-rated for VAT. This means that VAT is equivalent to zero, and you cannot claim back VAT on things like train tickets or plane fares. The same principle applies to domestic passenger transport in any vehicle, ship, or aircraft with at least ten seats, including those for the driver and crew. However, cable-suspended vehicles with less than ten seats, such as chairs, bars, or gondolas, are subject to reduced rates of domestic passenger transport VAT.
International airlines are required to comply with the legal and commercial obligations of the countries in which they operate, including any VAT requirements. While the VAT on domestic air transport is a political issue within each jurisdiction, international air transport is recognised as unique due to its operations across multiple jurisdictions and airspaces. As a result, any VAT paid on services and supplies purchased in a taxing country for international air transport should be zero-rated and fully refundable. This position is supported by ICAO resolutions, acknowledging that international air transport operates outside the boundaries of any single tax authority.
In the UK, while passenger flights are zero-rated for VAT, airlines are subject to Air Passenger Duty (APD), a tax incorporated into the ticket price. APD is levied on all flights departing from the UK, with the cost depending on the destination and class of travel. Domestic flights bear the cost of APD for both outbound and return journeys, while only the outbound leg of an international flight is taxed.
In South Africa, an Air Passenger Tax (APT) is applied to chargeable passengers departing on international flights from airports within the country. This tax is the responsibility of operators, registered agents, or charter operators, who must register and make monthly payments.
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VAT refund processes
The VAT refund process at airports is relatively straightforward, but it's important to note that the rules and eligibility criteria can vary from country to country. Here is a step-by-step guide to the VAT refund process:
Eligible Purchases
Firstly, ensure that you are making eligible purchases that meet the minimum spending requirements for VAT refunds. Not all goods qualify for a VAT refund, so it's important to check the specific regulations of your destination. Common eligible items include clothing, electronics, and souvenirs.
Receipts and Invoices
Retain your original receipts, which should clearly indicate that VAT was paid on the items. The retailer should provide a proper VAT invoice. Some stores may offer to handle the refund process for you, so look out for "Tax-Free" stickers in the window.
VAT Refund Form
Ask the retailer for a VAT refund form or a tax-free shopping form, and complete it with accurate details, including your contact information. Some merchants will reimburse your credit card on the spot, while others may direct you to a third-party agency for an immediate cash refund.
Visit Customs
Before checking in for your departure flight, go to the customs desk or designated tax refund point within the airport. Be sure to have your purchased items, receipts, and passport on hand. Customs authorities may inspect your items to verify that they are indeed leaving the country with you. Some countries have specific rules and limitations for certain items, such as jewelry or luxury goods.
Validation and Refund
Once your documents have been validated by customs, you may receive your refund in cash, check, or credit to your card, depending on the country's procedures. The refund will typically be in the currency of the country from which you are departing.
It's important to note that there is usually a time limit for claiming VAT refunds, and you'll need to apply within a specified timeframe from the date of purchase, which can vary by country. Additionally, some refund providers may deduct administrative fees from your refund amount.
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Frequently asked questions
No, you do not pay VAT on the cost of flights. However, there are other taxes and fees associated with air travel, such as the Air Passenger Tax (APT) and the Air Passenger Duty (APD).
The Air Passenger Tax is a levy imposed on passengers departing from an airport within the Republic of South Africa to a destination outside the Republic. It is applicable to both commercial and charter flights, but only for international travel.
The Air Passenger Duty is a tax levied by the UK government on passenger flights departing from UK airports. The amount of APD paid depends on the destination and the class of travel, ranging from £7 to £224 per flight.
Yes, you can claim a VAT refund at the airport or another designated point. You must have made eligible purchases that meet the minimum spending requirements for VAT refunds and retained the original receipts. You will also need to present the purchased items and your passport at the customs desk or VAT refund desk.
