El Corte Inglés and Iberia, together with British Airways (an airline also part of the IAG group), join forces to encourage shopping tourism in Spain for British travelers thanks to the tax free (the Anglicism with which the procedure to obtain the tax refund is known). With Brexit, residents of the United Kingdom can claim from January 1 of this year a VAT refund on their purchases in the European Union, something that has not yet had an impact due to the pandemic. Now, with the reopening of tourist mobility for those vaccinated with the full schedule, it is about taking advantage of the position of the country, the destination that more travelers from the British Isles receives each year, to make cash and boost spending per tourist.
To get British visitors to travel and spend more in Spain, the department store chain will offer a gift card with 10% of the amount spent for UK residents who take advantage of the tax free. It is a welcome promotion to publicize this new advantage, according to company sources. And Iberia, for its part, will promote the tickets with another 10%. British Airways joins this initiative and there are already other firms interested in joining the campaign. “The first thing will be to carry out a powerful communication and promotion program in the United Kingdom to explain the benefits of tax free”, Say sources from both companies. A point on which the British ambassador in Spain, Hugh Elliott, points out the winners of the change: “Businesses in general will benefit a lot because it will increase spending.”
The first step is to publicize the new tax advantage at origin and destination, since most travelers and a large part of the stores are unaware of this situation and are not prepared to take advantage of it. In fact, market sources expect growth to be noticed year-on-year until the peak in 2023, when there will be greater awareness. Spokespersons for the British Chamber of Commerce in Spain confirm that various companies have already requested information in this regard. According to the forecasts of Planet, a payment company that also manages the tax refund, the average spending on purchases by the English is between 200 and 300 euros, but with the tax free They expect it to rise to between € 400 and € 500 per traveler.
Thus, Brexit not only has multiple adverse effects for companies and people on both sides of the border. In the case of tax free It will be a ball of oxygen for tourism and the Spanish commercial sector at a very delicate moment. For practical purposes, this can be compared to an aggressive offer from any mall. For example, as if a store gave away for the purchase of an iPhone 12 Pro (it costs 1,159 euros in the Apple store) some AirPods (179 euros). And this same offer could be extrapolated to other purchases, from clothes to bags, through jewelry or electronic products. A breath of fresh air for a business lacking in good news.
Since the start of 2021, the EU has become a big tax-discounted bazaar for the British (except residents of Northern Ireland). Of course, this sale will not apply to all expenses, according to government sources. “It must be objects acquired occasionally for personal use or gift. You cannot recover VAT on expenses such as restaurants, hotels, shows and in general any product that is not exportable and that is also an occasional expense, which also leaves out all food ”, explain the Ministry of Foreign Affairs and the Agency Tax. The refund of the tax paid does not occur at the time of purchase, but the customer has to claim it later. For this, it is necessary to request the DIVA tax free form at the store or have the complete invoice and, upon arrival at the airport, show it at the customs stamping point. With the DIVA system, the advantage is that it is possible to do digital sealing on automatic machines and avoid queues.
Therefore, visitors from the United Kingdom will be able to make purchases in shops in Spain and receive a refund of 21% VAT, which is levied on most items, especially if they are luxury products, which are expected to be those who benefit the most from the new rules. Jorge Esteban, Planet’s general manager for Spain and Portugal, considers it a huge opportunity: “Spending is going to increase, we just need to know how much. Now the important thing is the promotion and to inform of this possibility in origin and destination ”. Sow with a pedagogical work to, later, reap the harvest.
Positioning in shopping destination
According to market sources, the forecast impact on trade in Europe is an increase of about 40,000 million euros. Of that cake, Spain is in the lead to bill a part of them, since it is the main destination of the British: 18.1 million travelers in 2019, ahead of France (10.3 million) and Italy (5.1 million), according to data from the UK Office for National Statistics (ONS).
That by volume. However, for travel reasons, shopping is not a strength of Spain compared to other European destinations (the big rivals in this field are France and Italy). According to sources from Iberia and El Corte Inglés, this must be the turning point for tourism, which must bet more on quality and spending and not so much on volume, a vision shared in part also by the Government. Not only in order to attract the British, but also to get out of the crisis with the focus on more distant countries. “Long-haul tourism is the number one priority in neighboring countries. Spain should not be left out ”, explains Javier Fernández Andrino, director of international clients and luxury at El Corte Inglés.
At this point it coincides with Iberia, a traveling companion in this alliance for attracting the British to buy more from Spain. In the past, the airline Fitur presented its strategy, focused precisely on attracting more and more long-haul tourists. “It is very important to turn Madrid airport into a hub 360 degree viewer that looks more to Asia and the Middle East. For this, the destination has to meet all the characteristics that these travelers demand, and the purchase is very important, in addition to culture and gastronomy, ”says Juan Cierco, Iberia’s corporate director.
One of the great pending tasks in Spain on the tax free It is to enable the option in the Canary Islands, where, due to its special tax regime, tourists cannot receive the refund of the consumption tax, at least not for the moment. “Barcelona, Madrid, the Balearic Islands and the Costa del Sol should be the great beneficiaries,” say sources from Iberia and El Corte Inglés. To which Esteban, from Planet, adds: “In the Canary Islands, where almost five million British people went before the pandemic a year, what is done in the rest of Spain should be replicated or it will be at a disadvantage with other destinations in the country and Europe”.
Madeira and Azores, in Portugal, started in a similar situation to that of the Canary Islands. However, in both cases the tax free. Industry sources point out that negotiations with the regional authorities are underway, although not closed. Despite this, they are optimistic and believe that it will succeed, as it will help to create employment in commerce and stimulate spending.