As the world becomes digitised, the volume of both imports and exports has increased significantly. However, this comes with complications related to tax laws in the international business arena. This is one of the reasons why it’s easy to come across businesses faced with tax fraud issues.
At the same time, businesses pay significant sums of money when on business travel in foreign countries. Since most of these expenses are deductible, the money can be recovered if the proper filing procedure is followed.
What is VAT and who’s eligible for refunds?
VAT is a tax that is levied on consumables in most countries in the world today. Most tax laws support the VAT refund for a business that is not based in the particular country. But for VAT that is not related to entertainment and travel expenses, you might be required to get registered before claiming for the refunds.
Most registered businesses are entitled to VAT reclaims as long as the expenses in question are subject to VAT. However, the regulations around vat refund for business are different in the various countries with respect to rates and items that qualify for a VAT refund.
If you have a business based in the EU but its VAT registered according to the tax laws in your home country it’s easy to get a tax refund. Similarly, businesses based outside the EU have to be registered for VAT in the home country to qualify for VAT refund for business.
Business expenses that qualify for tax refunds
Different countries have varied rules and rates and it can be cumbersome to monitor the specific applications. To illustrate, France will only give you VAT refunds for hotel expenses on only third parties. At the same time, UK only grants refunds for employee hotel expenses while in Germany you get a refund for the total amount irrespective of whoever spent the money.
Generally, most countries recognise these expenses as VAT deductible:
- Car rental and fuel expenses
- Expenses on hotel accommodation and meals
- Public transportation as well as taxi expenses
- Trade shows and business conferences
- Marketing expenses and professional fees
- Intercompany seminars, services, and travel delegations
- Drop shipping, maintenance contracts, and installations
- Import VAT and logistics
Tips to help you raise the chances of VAT recovery
When you are filing your application for VAT refund for business, observe these tips to maximise your chances of getting the full refund.
- At all times, submit the original copies of invoices which are identified by the word invoice clearly printed on the document. This can be either in English or the corresponding local language
- When making the purchases, ask more than the proforma invoice and credit card slip since these are not acceptable in tax refunds
- It’s always good to make sure the invoice has your business address rather than personal home address
- The compliance of all the supporting documents is important and if you are not conversant with the laws of the land, ask an expert to help you
- All claims in the EU should be filed before 30th September while claims in non-EU countries should be submitted before 30th June and make sure that the claim has been received.
It’s important to satisfy the requirements for VAT reclaim and respond to any queries from the authorities in a timely manner. Above all, it would be best if you started using good claim management software.