Alipay Launches Digital VAT Refunds To Save Chinese Travelers Millions

Mobile wallets, arguably built to solve problems that few consumers had, are again taking on a common hassle faced by travelers who cross international borders: getting those refunds on local taxes.

China-based Alipay said on Monday (Aug. 20) that via a partnership with tax refund agency Global Tax Free (GTF), it now offers the “world’s first paperless mobile tax refund function in South Korea,” according to a statement. The launch of this service follows the debut in early 2017 of a similar service in Europe, through which users could receive tax rebates in their Alipay accounts “after scanning their Alipay QR codes at airport tax counters.”

For the South Korean service, Chinese tourists claim tax refunds via their mobile apps, and can skip tax refund counters altogether. “After scanning their passports at self-service kiosks prior to leaving South Korea, Chinese tourists can use the Alipay mobile app to scan eligible tax refund receipts within 90 days of purchasing and receive RMB refunds immediately,” Alipay said.

The company added that some 10,000 South Korean merchants support the Global Tax Free refund service. “Alipay and GTF have plans to expand the tax refund service to more merchants and other countries in Asia in the future,” the statement added.

Chinese Travel

About 154 million Chinese consumers will travel overseas this year, and the increasing numbers are changing the global payments and commerce landscape, including the expansion of Alipay and its rivals overseas. Those consumers will spend an estimated $261 billion this year on their trips.

Meanwhile, mobile wallet operators and the technology providers that work with them are trying to make those payment tools more appealing to consumers, with the goal of making mobile wallets a bigger part of daily, mainstream commerce.

One hot trend — or, at the least, topic of discussion — is providing more “single scan” transaction capability. That means a mobile wallet that not only handles the exchange of funds, but also provides loyalty, coupons and other services, and in a way that does not require the consumer to do anything but take a single action per purchase.

Tax Opportunity

Can providing travel tax refunds via mobile wallet help make that payment technology more appealing to more consumers?

That’s hard to say, but there is certainly an opportunity there. For instance, about 4 percent of global travel spend offers reclaimable VAT, according to one estimate, “a figure that rises to 10 percent of European travel (discounting airfare). If you take into consideration that projected figures put business travel spend at around $220 billion for 2017 in Western Europe alone, it’s clear to see that we are speaking about large amounts of unclaimed money.”

A separate estimate, though a few years old, also shows the scope of the opportunity: Irish students leave behind more than $1 million in unclaimed tax rebates when they leave the United States every year.

Much of that money goes unclaimed because travelers, even those on business trips, do not want to go through the hassle of doing the paperwork required to get back that money, as manually reclaiming money requires a level of expertise.

“Different countries have different rules that need to be adhered to, and the type of business will also impact what can and can’t be claimed,” said SAP Concur. “This, combined with the fact that much of the paperwork can be rejected for any mistakes – not to mention the lengthy process – means the finance team may be put off considering VAT reclaim.”

There are already mobile apps that can tell international travelers where they can shop tax-free. The recent Alibaba tax refund product launch suggests there remains ample opportunity to win over more consumers via such services.