There is an enormous temptation to buy a watch abroad. You’re on holiday. The bills are at home. Factory tour? Sure! The horological urge is equally strong at the airport duty free shop. Or that fancy foreign watch boutique you entered “just to look around.” Don’t do it! Don’t buy a watch abroad. Here’s why . . . [UPDATE: UK VAT Rebate Still Dead – US Watch Buying Discount Down to 11%]
“Duty Free” is a hassle
A foreign watch dealer is required to charge you Value Added Tax (VAT or sales tax) on your watch purchase. After you pay the tax, you can claim it back from the government (even at “tax-free” locations). To reclaim your cash, you have to follow the government’s instructions to the letter. ricksteeves.com:
Some merchants will reimburse your credit card on the spot, or you may be able to take your paperwork to a nearby third-party agency to get an immediate cash refund (minus a commission for the quick service; these tend to be located at money-exchange counters near touristy shopping areas — think the Champs-Elysées).
In either case, you may need to get the documents stamped at the border, then mail them back; if the shop or agency never receive the documents, they’ll charge the refund amount to your credit card.
What could possibly go wrong? Even if nothing does, even if you enjoy filing paperwork, there’s another reason you don’t buy a watch abroad: Uncle Sam.
U.S. Customs duty limits watch “bargains”
“Duty free” purchases are exempt from taxes imposed by the home country – but not the U.S. Uncle Sam allows returning Americans to import up to $800 worth of merchandise without having to pay duty ($1600 from the U.S. Virgin Islands). Everything above that requires a customs declaration and incurs import tax.
Customs and Border Patrol charges a 3% import tax on the first $1000 beyond the $800 exemption. They charge 6.5% on any amount above the first grand.
Assuming you don’t take the $800 exemption (because you’ve made other other purchases and I hate doing math in public), the feds charge $290 on a $5k watch. They hit you up for $1265 on a $20k watch.
The U.S. is home to over 11k tax jurisdictions. Most of them charge both local and state sales tax. If you buy a new watch in Austin, Texas, for example, the total combined sales tax is 8.25%. On a $5k watch, that’s $412.50. On a $20k watch, you pay the governor and mayor $1650.
Bottom line: in Texas, you’d save $122.50 by buying a $5k watch abroad, and $385 on the $20k watch. You’d save more in higher tax jurisdictions, but enough to cover your expenses and the hassle of paperwork? Not IMHO.
[NB: avoiding U.S. Customs duty (a.k.a., smuggling) is a criminal offense.]
Watches purchased abroad miss out on authorized dealer love
Authorized dealers offer customers hidden value. If the manufacture needs to put something right, an authorized dealer has more juice (access to the corporate mothership) than you do.
They’ll usually pay for shipping and insurance when needed. AD’s also have watchmakers on call who can offer quick fixes and sage advice on which watches don’t suck.
AD’s also have access to information on new models, and the new models themselves. If you’re hunting a grail watch (e.g., a steel Rolex Daytona) every watch you buy at an AD brings you closer to the Valhalla. I scored a Rolex Explorer from a dealer in one week thanks to previous purchases.
Don’t buy a watch abroad. It’s not worth the hassle, the savings aren’t significant and you miss out on AD goodwill. If you want to save big bucks on a luxury watch, buy pre-owned, discontinued or “black market” models from a reputable stateside source.