Spain starts to reap rewards of one Brexit benefit
British tourists in Spain are taking advantage of a perk that the UK’s exit from the EU has brought on: tax-free holiday shopping. Although they’re already splurging more than ever, it remains an untapped diamond for the Spanish economy.
Around 715,000 British tourists visited Spain during August 2021, the Spanish government announced on Monday, representing around one in every seven of the 5.2 million international tourists that spent their holidays in the country during the summer month.
It’s a far cry from the 2.1 million Britons who reached Spanish shores in August 2019, but the pandemic together with the UK’s strict traffic-light system and costly testing requirements have all contributed to dissuading many from going abroad.
However, Spanish authorities are feeling rather buoyant about the future of British tourism in Spain now that Brexit has come into force.
The reason for this is that as non-EU residents, UK holidaymakers in Spain or in other countries in the bloc can claim back VAT of up to 21 percent on goods they buy during their trips.
It does not apply to services– you can’t get the VAT back on your restaurant bills, car rental, theatre tickets, flights, or train tickets. But it does apply to fashion items, cosmetics, jewellery, technology, and some food and drink items.
The tax-free agreement has opened up a wealth of possibilities for Spain’s retail and tourism sector, both of which are looking to attract big spenders in a similar way to how their French and Italian counterparts do.
So far, there is a reason for Spain to feel confident this new arrangement could have a positive impact.
From January to September 2021, British tourists who deducted VAT spent an average €1,337 (£1,139) on their purchases, higher than any other non-EU nationality and far above the 2019 annual average of €357.
According to figures from tourism shopping tax refund company Global Blue, so far this year Chinese tourists who deducted VAT have been the second biggest spenders in Spain averaging €837 in purchased goods.
But as things stand, many British tourists in Spain are still unaware of this Brexit-induced shopping perk.
“According to the retail stores in Spain, only 10 percent of British tourists who have bought in Spain have taken advantage of the VAT refund,” Global Blue’s General Director in Spain Luis Llorca is quoted as saying in El País.
“It’s a very low percentage since for the rest of non-EU nationalities the rate of awareness is always above 50 per cent”.
For Llorca, it’s hard to estimate how much this market could be worth in the current climate and with so little time since the UK left the EU, but it could be hundreds of millions or billions.
“There’s a correlation between VAT deductions and the positive impact this has on a country’s GDP,” Llorca added.
“In general terms, for each additional euro of VAT refund, demand increases by 1.45 euros and GDP increases by 35 cents.”
Shop owners don’t take on the VAT cost nor does it represent a financial loss for the country, as in tax-free shopping the operation is export so it doesn’t carry VAT.
Global Blue’s study “Brexit and Spain as a shopping destination” revealed that six out of ten UK tourists are willing to spend 50 percent of their holiday budget on shopping.
Spain’s retail sector (except for in the Canary Islands where there’s no tax-free system) finds itself in an enviable situation, but according to the experts, it must act quickly.
It faces stiff competition from countries such as Germany, France, Italy or Portugal and currently only gets 9 percent of the EU’s tax-free pie.
But one factor that does play in Spain’s favour is that in normal pre-pandemic times it’s the favourite destination of British tourists, welcoming 18 million in 2019.
During the summer, El Corte Inglés department stores and Iberia partnered up to raise awareness among British holidaymakers of their newfound shopping benefits.
But according to Global Blue’s General Director in Spain, “Spanish authorities have not yet made the necessary effort to publicise this possibility of return on purchases”.
It’s an opportunity that cannot be missed, with at least €2.6 billion for the taking just in 2021.
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Published thelocal.es 07 October 2021