VAT Refunds

The VAT reclaim process reimagined: onerous paperwork and long queues at the airport coming to an end

December, 2020

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Industry Overview

The VAT refund industry has been around for more than 20 years now. Recent technological development and government digitisation initiatives are pushing the industry to evolve and new entrants are emerging. Key trend shaping the industry is the proliferation of technology at customers' fingertips. Many VAT Refund companies are looking to fully digitise the VAT refund process, however the level of digitisation per country depends on country regulations and technology adoption rates. To be able to process VAT refunds, a company needs local expertise as it needs to be under the supervision of local tax authorities.

 

With the increase of disposable income in Asia and in particular China (which is surpassing even the US for international tourist spending), VAT refund companies are expected to see a constant increase in revenues. 

 

The "traditional" VAT process in most countries is the following:

Customers and Partners

Customers

With international travel continuing to grow (excluding 2020 and 2021 due to Covid-19), and development in SE Asia and China, VAT Refund services are expected to flourish. Only for China, outbound tourism in 2019 was 170 million according to China Outbound Research Institute (https://china-outbound.com/).

Partners
Most companies are working exclusively with some retailers, however that limits their potential for growth. There are still some that give travellers the flexibility to buy products from every retailer (assuming that VAT legal requirements are fulfilled).

The New Business Model

VAT Refund companies are looking to digitise and simplify the VAT refund process. Predominately, the new process looks something like this:

Revenue, Costs and Margins

Digital-first companies
Intuitively, operational costs for VAT Refunds companies are quite low. When the VAT Refund process is streamlined and the company has all the needed assets (contracts, app, etc.), the highest costs would be for digital marketing.

Incumbents

Traditional players have higher operational costs than the digital-first companies as there are costs associated with distribution of pre-paid envelopes, manual processing, signing up and training retailers. 

Figure 1: Investments in VAT Refunds companies

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Notes: 

The Parrot collects information from a variety of sources. The chart is based on public data for tracked companies for the period 2016-2020. Last updated Nov 2020. Most companies reviewed by Insight Parrot are not considered startups as some of them have already been acquired by much bigger financial companies and some of them have been founded more than 20 years ago and have an old-fashioned operational process. Nevertheless, we have included those companies as a reference point.​

Investments

The investments in the chart below are based on the few "true" startups (with digitised product offering) with available investment information - Refundit, Refundme and WeVAT. Investor interest in this industry seems to be reserved for companies looking to digitise the VAT refund process and decrease fees.

Risks

Regulations

As the VAT refund industry is heavily regulated, changes to regulation could be good (e.g. digitisation of government services) or bad (Brexit-like events could bring uncertainty for the industry some companies (e.g. WeVat) are moving their focus from the UK to other European countries). Heightened regulatory complexity could also prove to be a challenge.

Fee structure

Decreasing customer fees is essential for VAT refund incumbents. At the moment fees are quite high (in the range of 30%-70% of the VAT amount for most companies) and the industry is ripe for disruption. By digitising and streamlining the process new entrants in the space can drive down fees and capture market share.

Changes in travel

Currently, Covid-19 is negatively impacting travel and with it retail spend of travellers. Startup companies' survival would depend on the rate and shape of recovery (whether it would be an V-shaped, L-shaped or Tick-shaped recovery), government travel restrictions and appetite for travel. For the moment most companies are in a “wait-and-see” situation.

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Companies

Insight Parrot explores thousands of data points and is on the lookout for trends that shape the forward curve of your industry to help you navigate the ever changing travel landscape and harness the potential of unfolding opportunities.

Reviewed companies in this analysis:


| AirVAT | Custom Cash | Detaxe | Easy Tax-free | Evalidation | Innova Tax Free | Planet Payment | Refundit | Refundme | Revenit (RefundGiant) | Solpay | Stampit |

The Parrot collects information from a variety of sources. If you want to tell us about a new company, notice anything missing or any errors, please get in touch.

AirVAT

Coverage

UK

Pricing

20% of VAT amount

Founded

2017 in London, UK

Number of Employees

1

Funding

-

SWOT

Strengths
- Russian and Chinese versions available
- Digitalised solution
- Good digital assets (website and app)

Weaknesses
- Limited coverage (only the UK)

Opportunities
- Expand into other markets

Threats
- Competitive threats
- Changes in regulation
- Covid-19

Custom Cash

Coverage

Denmark, Sweden, Norway

Pricing

Claim to offer 0% fee

Founded

2017 in Copenhagen, Denmark

Number of Employees

6

Funding

-

SWOT

Strengths
- Present in whole Scandinavia
- Highest refund guaranteed
- Digitalised solution
- Chinese version available

Weaknesses
- Present only in specific partner stores

Opportunities
- Expansion into other markets

Threats
- Competitive threats
- Changes in regulation
- Covid-19

Detaxe

Coverage

France with strong presence in Paris, ski resorts and on the Côte d’Azur

Pricing

-

Founded

Founded in 2001 in France by Philippe Guerin (currently owner)

Number of Employees

6

Funding

Share capital €40,000

SWOT

Strengths
- 19 years of experience
- Local knowledge

Weaknesses
- Limited coverage
- Does not seem that the company is growing
- Not a digitalised solution. Customers have to send Detax documents by post
- Digital assets not great. Website is clunky and they don't have an app
- Unclear pricing

Opportunities
- Expansion into other markets

Threats
- Competitive threats
- Changes in regulation
- Covid-19

Easy Tax-free

Coverage

Netherlands, Belgium, Germany

Pricing

~50% of VAT amount

Founded

Founded in 1999 in Amsterdam, The Netherlands by Peter Hooft

Number of Employees

3

Funding

-

SWOT

Strengths
- Present in 3 countries (Netherlands, Belgium, Germany)
- More than 20 years of experience

Weaknesses
- Limited coverage as service is available only in partner shops
- Not a digitalised solution
- Don't have an app
- High fees

Opportunities
- Growth opportunities in other markets
- Develop an app and digitise the process

Threats
- Competitive threats
- Changes in regulation
- Covid-19

Evalidation

Coverage

Austria

Pricing

-

Founded

Founded in 2017 in Vienna, Austria

Number of Employees

10

Funding

-

SWOT

Strengths
- 100% digital

Weaknesses
- Limited coverage
- Unclear pricing

Opportunities
- Growth opportunities in other markets

Threats
- Competitive threats
- Changes in regulation
- Covid-19

Innova Tax Free

Coverage

Belgium, France, Germany, Ireland, Italy, Japan, Portugal, Spain, The, Netherlands, Singapore, Turkey, United Kingdom

Pricing

>50% of VAT amount

Founded

Founded 2003 in Madrid, Spain with Luciano Ochoa de Abreu as current CEO

Number of Employees

28

Funding

A subsidiary of Euronet Worldwide group

SWOT

Strengths
- Good coverage - present in 12 countries
- More than 17 years of experience

Weaknesses
- High fees
- Not a digitalised solution

Opportunities
- Develop an app and digitise the process

Threats
- Competitive threats
- Changes in regulation
- Covid-19

Planet Payment

Coverage

Austria, Bahrain, Belgium, Cyprus, Czech Republic, Denmark, Faroe Islands, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Russia, Slovakia, South Korea, Spain, Sweden, Switzerland, UAE, United Kingdom, Turkey

Pricing

up to 70% of VAT amount

Founded

Founded 1985 in Galway, Ireland with Patrick Waldron as current CEO

Number of Employees

1000

SWOT

Strengths
- Present in 30 countries
- Big company capable of large scale projects
- More than 35 years of experience

Weaknesses
- High fees
- Not a digitalised solution

Opportunities
- Develop an app and digitise the process

Threats
- Competitive threats
- Changes in regulation
- Covid-19

Refundit

Coverage

Belgium

Pricing

9% of VAT amount

Founded

Founded in 2017 in Tel Aviv, Israel by Ziv Tirosh and Uri Levine

Number of Employees

30

Funding

On 14 November 2019 raised $9,800,000 from Amadeus IT Group and Portugal Ventures

On 1 January 2018
Refundit competed a $2,500,000 seeding round

Source: https://www.crunchbase.com/

SWOT

Strengths
- 100% digital solution
- Low fees
- Completed several funding rounds

Weaknesses
- Limited coverage

Opportunities
- Growth opportunities in other markets

Threats
- Competitive threats
- Changes in regulation
- Covid-19

Refundme

Coverage

Most of Europe

Pricing

-

Founded

Founded in 2018 in Amsterdam, The Netherlands by Csaba Szabo and Jerome Ibanez

Number of Employees

2

Funding

On 1 December 2018 raised €67,500 of angel funding from Leapfunder

On 5 November 2018 raised €15,000 pre-seed from Startupbootcamp

Source: https://www.crunchbase.com/

SWOT

Strengths
- Good coverage in Europe
- Completed several seed rounds

Weaknesses
- Unclear pricing
- Although the website shows screenshots from the app, the app does not show in the App Store

Opportunities
- Product development

Threats
- Competitive threats
- Changes in regulation
- Covid-19

Revenir (RefundGiant)

Coverage

UK

Pricing

25-30% of VAT amount

Founded

Founded in 2019
in London, UK by Alexander Zhou and Shawn Du

Number of Employees

5

Funding

On March 2020 a seed round was completed with Creator Fund and Y Combinator participating

Source: https://www.crunchbase.com/

SWOT

Strengths
- 100% digital
- Recently, completed a seed funding round

Weaknesses
- Limited coverage

Opportunities
- Expansion into other markets

Threats
- Competitive threats
- Changes in regulation
- Covid-19

Solpay

Coverage

France, Monaco and limited coverage for UK and Switzerland

Pricing

50%-60%

Founded

Founded in 2008 in Le Cannet, France with Grégory Briand as general director and Julien Balazun
as president

Number of Employees

25

Funding

-

SWOT

Strengths
- Good coverage for France
- 12 year of experience

Weaknesses
- Limited coverage for other markets
- High fees

Opportunities
- Expansion into other markets
- Digitise product offering

Threats
- Competitive threats
- Changes in regulation
- Covid-19

Stampit

Coverage

Italy and Austria

Pricing

Free for purchases below €500

€9.99 flat fee for purchases between €500 and €5000

€19.99 flat fee for purchases between €5000 and €20000

Founded

Founded in 2017 in San Vittore, Italy by Federico Degrandis, Wagner Eleuteri, Michele Fontolan, Stefano Fontolan

Number of Employees

20

Funding

-

SWOT

Strengths
- Low fees
- Digitalised solution
- Great digital assets (webpage and app)

Weaknesses
- The solution is available only at partner stores
- They could be cash-strapped

Opportunities
- Grow the network of partner stores
- Grow internationally

Threats
- Competitive threats
- Changes in regulation
- Covid-19