Iberia and El Corte Inglés join forces to attract Britons to duty-free shopping
El Corte Inglés and Iberia, together with British Airways (an airline that is also part of the IAG group), join forces to encourage shopping tourism in Spain for British travelers thanks to tax free (the anglicism with which the procedure for get tax refund). With Brexit, residents of the United Kingdom can claim a VAT refund on their purchases in the European Union from January 1 of this year, something that has not yet had an impact due to the pandemic. Now, with the reopening of tourist mobility for those vaccinated with a full guideline, it is about taking advantage of the position of Spain, the destination that receives the most travelers from the British Isles each year, to raise 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 tax free. It is a welcome promotion to publicize this new advantage, according to company sources. 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 to Spain, Hugh Elliott, agrees, pointing 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 the majority of 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 the growth to be noticeable year on year until the peak in 2023, when there will be greater awareness. Spokesmen 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 refund of the tax, the average spending on purchases by the English is between 200 and 300 euros, but with tax free they expect it to increase to between 400 and 500 euros 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 breath of fresh air for tourism and the Spanish commercial sector at a very delicate time. For all practical purposes, this can be compared to an aggressive offer from any mall. For example, as if a store gave away some AirPods (179 euros) for the purchase of an iPhone 12 Pro (it costs 1,159 euros in the Apple store). 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 trade lacking good news.
Since the start of 2021, the EU has become a huge bazaar with tax breaks for Britons (except those residing in Northern Ireland). Of course, this sale will not apply to all spending, according to government sources. “It must be objects acquired occasionally for personal use or as a gift. VAT cannot be recovered on expenses such as restaurants, hotels, shows and in general any product that is not exportable and 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. To do 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 digital sealing can be done in automatic machines and avoid queues.
Therefore, visitors to the United Kingdom will be able to make purchases in stores in Spain and receive a refund of the 21% VAT that is levied on most items, especially if they are luxury products, which are expected to be those most benefited by the new rules. Jorge Esteban, general manager for Spain and Portugal at Planet, sees it as a huge opportunity: “Spending is going to increase, it just remains to be seen how much. Now the important thing is to promote and inform about this possibility at 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 around 40,000 million euros. Of that cake, Spain is in the lead to invoice 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 reasons of travel, shopping is not a strength of Spain compared to other European destinations (the great rivals in this field are France and Italy). According to Iberia and El Corte Inglés sources, 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 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 the countries around us. Spain should not be left out”, explains Javier Fernández Andrino, director of international clients and luxury at El Corte Inglés.
On this point he agrees with Iberia, a traveling companion in this alliance for attracting the British to buy more from Spain. The airline presented in the past Fitur its strategy, focused precisely on attracting more and more long-haul tourists. “It is very important to turn the Madrid airport into a 360-degree hub that looks more at Asia and the Middle East. For that, the destination has to meet all the characteristics that these travelers demand, and shopping is very important, in addition to culture and gastronomy," says Juan Cierco, corporate director of Iberia.
Pending tasks
One of the great pending tasks in Spain regarding tax free is to enable the option in the Canary Islands, where due to its special tax regime, tourists cannot accept 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," Iberia and El Corte Inglés sources maintain. To which Esteban, from Planet, adds: “In the Canary Islands, where almost five million Britons a year used to go before the pandemic, what is done in the rest of Spain should be replicated or it will be at a disadvantage compared to other destinations in the country and beyond. Europe".
Madeira and Azores, in Portugal, started from a situation similar to that of the Canary Islands. However, in both cases the tax free is allowed. Industry sources point out that the negotiation with the regional authorities is underway. Despite everything, they are optimistic and believe that it will go ahead, since it will help create jobs in trade and stimulate spending.
