What is Value Added Tax?
VAT is a consumption tax levied on goods and services and the national tax systems of Europe, Canada, Japan and Australia allow for a refund of VAT to most non-resident business entities worldwide. For VAT not related to travel and entertainment, registration for VAT may be required in order to get a refund. In some cases, registration must be done prior to the business transaction.
What is a VAT refund?
As a business if you are VAT registered and you’ve been charged VAT for a good or service that has been supplied to your business or an employee of your business, you can claim the VAT back on that, therefore you will need to keep all invoices you receive as evidence to support your claim. These VAT invoices must have been issued by someone who is also VAT registered.
How do I reclaim VAT?
In order to reclaim any VAT that you are charged when you pay for goods and services your business must be VAT registered. So, for example if you have employees that regularly travel abroad for business purposes you can claim back the VAT, they incur on hotel bills, meals, transport etc. In many cases this can represent significant savings for your business. Every company extending their activity abroad must consider the need for a VAT registration. The requirements for this vary from country to country. The general rule is that VAT may be reclaimed on goods bought up to four years before registration and services up to six months before registration.
Are there rules for reclaiming VAT?
Claiming VAT back within the EU
The EU directive introduced a new procedure for businesses established and registered for VAT purposes within the EU to request a refund of VAT incurred in other EU member states. The directive allows EU businesses to submit a refund claim via the web site of the tax authorities of the country in which the claimant is established. Refund requests are handled by the member state of refund, the amount refundable will be determined under the deduction rules of that member state and the payment of the refund will be made directly to the claimant by the member state of refund. For European Union Claimants the Annual deadline for the submission of the VAT refund under the 8th Directive is the 30th of September of the following year – Excluding Switzerland which must have VAT refunds submitted by June 30th.
Non-EU Businesses claiming VAT within the EU
Some restrictions apply for specific industries such as public bodies and financial services. There are also restrictions for countries where there is no reciprocity agreement in place where the expense is incurred. A reciprocity agreement means they will only refund VAT to businesses registered in countries where they too refund VAT, ensuring a comparable advantage to a company making a similar claim in the country of the claimant. Each country has its own rules and regulations in relation to refund rules as well as VAT rates varying from country to country. For Non-European claimants the deadline for the VAT refund under the 13th directive is the 30th of June following the year of claim.
What can a business claim back VAT on?
As a business you can claim back VAT that you have been charged for a good or service that has been supplied to your business or an employee of your business.
Employees travelling internationally are one of the biggest sources of reclaimable VAT. Depending on nominal criteria varying from country to country, this includes VAT on accommodation, meals, transport costs, marketing costs, costs incurred in relation to participating in an event, an exhibition or a conference, etc. Global Tax Reclaim specialises in international VAT reclaim for business entities. Primarily relating to EU cross-border (foreign) VAT on business travel expenditure.
Your company is entitled to recover up to 25% of your domestic VAT refunds on local travel and entertainment expenses incurred by your employees on local business trips. A lot of business run into problems when trying to recover local VAT on T&E due to incorrectly identifying the values of recoverable VAT. Global Tax Reclaim can assist your business with reclaiming domestic VAT without it being a burden and in turn reducing overall business costs and our solution is the most advanced at optimising your domestic VAT compliance.
A supplier invoice is the bill issued by a vendor for goods delivered or services rendered to a customer. If your business has received a foreign supplier invoice, it may be a good idea to consider a review to see if the foreign VAT was applied correctly. Global Tax Reclaim can assist with a free review of your supplier invoices and help in the recovery of the relevant amounts.
Import and Export VAT
When importing goods into a country there is a level of taxes, duties and customs. Import VAT is charged as a percentage of the value of the imported goods, not the shipping cost. This can be as high as 27% on top of items. Import VAT that is applied is generally recoverable with other VAT.
How much VAT can you reclaim?
Businesses can reclaim most of the VAT paid on eligible expenses based on nominal criteria, although in some cases only a partial recovery of the VAT amount paid is allowed. Eligible business expenditure and VAT rates vary from country to country. Each individual country and its Tax Authorities have varying frequencies in which your business can submit a VAT refund claim.
How Global Tax Reclaim can help your business claim back VAT
We specialize in international Value Added Tax reclaim for business entities. Primarily relating to European Union cross-border VAT on business travel expenditure and local services provided by EU suppliers in countries where the client is not registered for VAT. The rates of VAT and rules in relation to eligibility for refund vary across all EU Member states. The average VAT rate within the EU amounts to 20% of the transaction cost with VAT rates of up to 27% applying in EU countries
Even though most companies are entitled to recover foreign VAT, many don’t have the technical knowledge or the capacity to resource this activity sufficiently.
Our core experience and expertise together with our proprietary systems enable us to address the multiple layers in the EU VAT Refund process. Enabling us to offer a simple outsourced client solution which requires no client investment in staff resources or training. Finally, and most noteworthy, absolutely no up-front financial commitment from you as GTR’s reclaim fee is success-based and is only charged when VAT is successfully recovered.