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Before leaving Israel recently, I found the VAT desk at Ben Gurion airport. I provided sales receipts showing I paid VAT but was refused a refund. The person staffing the desk said: 1. Restaurant VAT is not refundable. 2. I need an additional form from the seller and that not all sellers have signed up for the refund system. (None of the places I made purchases said anything about giving me a VAT refund form even tho they told me I would get the VAT back at the airport.)

Do these two reasons seem legit?

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    I don't know explicitly about Israel, but in the UK, VAT refund is intended for large purchases (jewelry, electronics etc) which you are exporting from the country, and also requires that the seller be signed up for it. It is not intended for everyday traveling expenses. In the case of a restaurant meal, you're not exporting anything, so clearly you can't get that VAT back! I don't know why you think the staff at the airport would be lying to you! On the other hand, it seems much more likely to me that someone eager to make a sale would lie. – MJeffryes Jan 3 at 16:24
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In basically every country that offers it, tax refunds are for good (and goods only) that are leaving the country with you - and you generally must show the goods to prove that you are taking them out of the country with you.

Now whilst it is possible that the "goods" component of your restaurant bill is being taken out of the country with you (depending, obviously, on how recently you visited the restaurant!), it's a little hard to show that. Plus a reasonable component of your restaurant bill will be for "services" rather that goods, so it doesn't qualify there either.

For your goods purchases, some shops will indeed show a "Tax Free Shopping" sign that means they will provide the required paperwork for the refund. These are not overly common, and generally only in places that offer higher-value goods as there is a minimum transaction amount of 400 NIS (around US$100) in order for the purchase to be eligible.

So yes, the two reasons you were provided are absolutely legitimate and correct.

You can find more details on the refund program on the Israel Governments website.

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