With international business travel and cross-border transactions becoming more and more common, many businesses pay VAT in countries where they are not established or VAT registered. Typical expenses that incur foreign VAT are travel expenses, conference fees, business entertainment, supplier goods, marketing services and a host of other expense that take place when doing business on foreign soil. The VAT paid on these expenses can often be reclaimed.
If you are an EU-based business that has paid value added tax (VAT) in Europe during 2017, or a non-EU business based in specific countries, you may be eligible to recover the VAT. The deadline for submitting a claim to the relevant EU countries for a refund is 30 September 2018, so the time to act has arrived.
Is my business eligible?
The EU Directive 2008/09/EC, former 8th Directive, allows businesses established within the EU to recover VAT incurred in one of the 28 EU countries, if they meet the VAT reclaim deadline of 30 September.
Directive 86/560/EEC, also known as the 13th Directive, makes the same provisions for businesses registered in a non-EU country. Businesses registered in Belgium, Denmark, Estonia, Greece, Hungary, Italy, Latvia, Poland, Portugal, Romania and Spain are eligible for VAT reclaim if they meet the VAT reclaim deadline of 30 September, AND:
- The business is not VAT registered or eligible to be VAT registered in the EU
- The business has no other entity in the EU
- The business does not manufacture any supplies in the EU
- The expenses are incurred for an activity subject to VAT, where that VAT is considered eligible for refund under EU VAT legislation.
Note these eligibility requirements can be complex, depending on the claimant’s activities and types of expenses incurred.
What expenses are generally eligible for VAT reclaim?
VAT paid on certain business-related expenses are eligible for a refund. However, note that the rules and regulations of the specific expenses that are eligible for reclaim can vary widely from country to country. For example, some allow reclaim for fuel and accommodations, while other countries do not. In addition, some countries follow the reciprocity principle, which requires the business’ country of residence to allow reciprocal reclaim practices. Personal expenses are never eligible.
Why would a business need help with VAT recovery?
Many companies find the VAT refund process complex and tedious. The tax authorities of each EU country have a certain degree of flexibility in the implementation of VAT. Differences may apply to tax rates, exemptions, reverse charge mechanisms, languages, reporting requirements and deadlines. For example, Spain and Italy have specific digital reporting requirements. A company’s in-house finance department may not possess a clear enough understanding of the detailed and widely-varying regulations and requirements in each country.
Further, companies that do make the effort to recover their VAT are often unsuccessful. Claims are often addressed using semi-automated/manual and error-prone processes that are both time-consuming and costly. Unfortunately, if specific criteria or deadlines are not met, the refund is forfeited.
What should I do before 30 September?
- Complete the EU 8th or 13th VAT Directive claim forms. Note that you must file a separate claim for each country where you paid VAT. Forms can be accessed and downloaded from each tax authority’s website, and then filed together with the original paper invoices. Also, note that some forms must be completed in the local language.
- Note deadline exceptions. While the deadline for annual claims is generally 30 September, there are exceptions. For example, in the UK and Cyprus, the annual deadline for submission of VAT refund claims for non-EU businesses is 31 December.
- Solicit help. To ensure your business meets eligibility requirements, properly fills out all forms, and meets all relevant deadlines, oftentimes assistance is required. Take advantage of advanced, automated VAT recovery systems that seamlessly access standard data and scanned invoices from your ERP, TES and other internal systems to maximize your refund.
- Plan ahead. The way your organization treats project deadlines can speak volumes about your level of commitment to the work. Keep your VAT deadlines on track and on time with these tips.
VATBox has successfully streamlined the VAT recovery process, providing businesses and financial institutions with unrivaled visibility, compliance and data integrity. Leveraging the cloud and utilizing full automation, VATBox exhibits complete control of a company’s VAT spend, while making the recovery process more productive and yielding higher returns. To learn more about how VATBox’s AI-driven solution can help your company thrive in today’s complex financial times, request a free demo here