Whether you're eyeing designer handbags in Paris, leather goods in Florence, or luxury watches in Zurich, there's a smart way to make your euros go further, and many Australian travellers don't even know about it. It's called a VAT refund, and it could put a serious chunk of change back in your pocket before you even board your flight home.

Here's everything you need to know about getting your tax back in Europe.

What is VAT and why should travellers care?

VAT stands for Value Added Tax, and it's baked into the price of almost everything you buy in Europe. Unlike Australia's GST, which sits at a flat 10%, VAT rates in Europe vary quite a bit depending on the country. Luxembourg has the lowest standard rate at 17%, while Hungary tops the charts at 27%. Most of the big tourist destinations, France, Italy, Spain and Germany, sit somewhere in the 20–25% range.

That might not sound like much, but on a €500 leather jacket or a €2,000 watch, that's a significant sum. The good news? As an Australian visiting Europe, you're entitled to claim that tax back when you leave.

How does getting your VAT back work?

The VAT refund system exists because the tax is designed for residents — not visitors. Since you're taking your purchases home to Australia (a non-EU country), you're not really the intended taxpayer. The EU acknowledges this, which is why there's a formal process to reclaim it.

Steps for claiming your VAT:

1. Shop at participating stores: Not every retailer is set up for tax-free shopping, but many are. Look for a "Tax Free Shopping" sign or sticker in the window, or simply ask the staff.

2. Show your passport: You'll need to prove you're a non-EU visitor. Keep your passport handy when making bigger purchases.

3. Get your tax refund form: The shop will issue you a form (sometimes called a VAT 407 form in the UK, or a tax-free cheque through services like Global Blue or Planet). Fill it in carefully — errors can cause delays.

4. Get it stamped at the border: Before you check your bags at the airport, head to the customs desk and have your forms stamped. You'll need to show the goods, so don't pack them in your checked luggage just yet.

5. Collect your refund: Depending on the arrangement, you can receive your refund as cash, a credit card payment, or a cheque, either at a dedicated refund desk in the airport or processed after you return home.

What's the minimum spend for getting tax back?

There's a catch — there's always a catch. You generally need to spend a minimum of €175 in a single store to qualify for a VAT refund. This amount can vary slightly between countries, but €175 is the standard EU threshold. That means spreading small purchases across multiple shops won't get you there; you need to hit the threshold in one transaction or in one store on the same day.

Some stores will let you combine purchases made on the same day to meet the minimum, so it's worth asking.

Which countries are included?

To claim a VAT tax refund after leaving Europe, you need to be departing from an EU member state. The EU currently has 27 member states, and the big tourist favourites — France, Germany, Italy, Spain, Portugal, the Netherlands, Austria, and Greece — are all included.

A few popular destinations are not in the EU, which means the standard VAT refund rules don't apply in the same way. Switzerland, Norway, the UK and Iceland all have their own tax refund schemes that work slightly differently.

What can (and can't) you claim on?

The VAT refund applies to physical goods that you're taking home with you. Think clothing, jewellery, electronics, cosmetics, homewares, and souvenirs — essentially, anything you can carry out of the country.

There are a few things that are excluded, though:

• Services: Restaurant meals, hotel stays, tours, and experiences don't qualify. It's only physical goods.

• Tobacco products: These are excluded across the board.

• Large or installed items: If you buy a piece of furniture that needs to be shipped to Australia separately, the refund process gets more complicated.

• Consumables: Items that are "used" in Europe (like food or certain cosmetics) may not qualify.

Also worth noting: your purchases need to leave the EU within three months of the date of purchase. So if you're planning a long European adventure, make sure you're not buying refund-eligible goods at the very start of a longer trip.

Where to find the best tax free shopping in Europe

If maximising your VAT refund is a priority, it pays to know where to shop. Here are some of the best destinations for tax free shopping in Europe:

Tips to make the process smoother

Navigating the VAT refund process for the first time can feel a bit daunting, but these tips will help you avoid the common pitfalls:

• Keep everything together. Create a dedicated folder, physical or digital, for your VAT refund forms, receipts, and passport copies. Nothing is worse than frantically searching your bag at the airport.

• Allow extra time at the airport. Customs queues can be long, especially at major hubs like CDG in Paris or FCO in Rome. Build in at least an extra 45 minutes to an hour before your flight.

• Don't pack your purchases straight away. Customs officers may ask to inspect the goods when they're stamping your forms. Keep them accessible in your carry-on until the forms are stamped.

• Check the refund method. Some refund services charge a fee for cash refunds but process card refunds for free (or with a smaller fee). If you're not in a rush, card refunds are often the better deal.

• Use a refund service if it's easier. Companies like Global Blue and Planet Tax Free partner with thousands of retailers across Europe. They simplify the process and have desks in most major airports — ideal if you're shopping across multiple countries.

How much will you actually get back?

The refund amount isn't 100% of the VAT — there's usually an administration fee deducted by the refund service. Typically, you'll receive between 10% and 19% back on your purchases, depending on the country's VAT rate and the refund service's fees.

On a €1,000 purchase in France, for example, you could expect to get back somewhere between €100 and €160 after fees. Not life-changing, perhaps, but on a larger shopping haul, it absolutely adds up, especially if you're travelling on a budget.

Europe has something for every kind of traveller, no matter the season. Get the logistics sorted with Skyscanner's guide on how to plan a multi-city trip or discover why the tiny island of Malta deserves a spot on your bucket list. And when winter rolls around, there's no better reason to book a flight than Europe's best Christmas markets.