How Israelis Leave Billions Behind: A Guide to Tax Free Shopping Abroad
Israelis forfeit roughly 1.3 billion shekels annually in unclaimed VAT refunds while shopping abroad. Understanding Tax Free thresholds, customs validation, and digital intermediaries can significantly reduce travel expenses.
Shopping abroad is a popular way for Israelis to counter the high cost of living, yet millions of euros in potential Value Added Tax (VAT) refunds are left unclaimed every year. Despite digitized procedures, many travelers forgo Tax Free refunds due to a lack of awareness or fear of bureaucracy.
What Is a VAT Refund and Who Qualifies?
In most parts of the world, retail prices include VAT, which is fundamentally a tax on domestic consumption. To stimulate shopping tourism, numerous countries—including Israel—allow tourists to claim exemptions on physical goods taken back home. This mechanism applies exclusively to tangible merchandise such as clothing, electronics, and cosmetics, excluding services like hotel stays, restaurant meals, or car rentals.
Where Does Tax Free Apply?
VAT refunds are widely available across all European Union member states, as well as Switzerland, Japan, South Korea, and the United Arab Emirates. European nations typically maintain standard VAT rates of 20% or higher, whereas Asian and Gulf destinations feature lower rates, such as 7% in Thailand, 5 in the UAE, and 10% in Japan and South Korea.
Conversely, the United Kingdom eliminated most tourist tax exemptions following Brexit, while the United States relies on state sales taxes rather than a federal VAT, generally offering no tourist refunds. Canada and New Zealand similarly lack tourist tax refund programs.
Requirements and Spending Thresholds
Securing a refund requires meeting minimum purchase thresholds per store, per day. Most countries prohibit combining small receipts from different retailers across a trip. Furthermore, purchased items must remain brand new, featuring intact tags and packaging, as customs officials may reject claims for used goods. Exporting items within a strict timeframe—usually up to three months from purchase—is mandatory.
Citizenship does not dictate eligibility; residency does. Israeli residents staying abroad for less than six months qualify fully for European VAT refunds.
"Data clearly shows that travelers still leave behind substantial unclaimed expenses. It takes time to build awareness, but once a customer goes through the process successfully, the likelihood of repeating it is high," notes Itzik Avichayil, CEO of PassportCard Pay.
The Step-by-Step Refund Process
At the retail establishment, buyers must present a foreign passport and request a Tax Free form alongside a specialized receipt. At the airport prior to checking bags, travelers scan their forms at automated customs kiosks. Refunds can be credited directly to a credit card within a few weeks or collected in cash on-site.
According to estimates by PassportCard based on Central Bureau of Statistics data and company surveys, Israelis forfeit approximately 1.3 billion shekels in potential tax refunds annually due to language barriers, bureaucratic apprehension, and general oversight.
Market Intermediaries and Digital Solutions
Specialized mediating companies like Global Blue and Planet facilitate these transactions, deducting average handling commissions between 30% and 50% of the original refund amount, alongside currency conversion fees. In Israel, emerging alternatives like PassportCard Pay offer guided mobile applications to streamline airport validation and reduce administrative friction.
