As the world has become increasingly digitized, there has been a significant increase in volume of both exports and important. However, there have been complications arise that are related to tax laws in the arena of international business. That is one major reason why it is so easy to run into businesses facing tax fraud problems.
Businesses also pay large sums of money on business travel when they are in foreign countries. Most of those expenses are deductible, so the money may be recovered as long as the correct filing procedure is adhered to.
What is VAT and who is eligible to receive a refund?
VAT is a kind of tax that is levied by most of the world’s countries on consumables. A majority of tax laws support a VAT refund for businesses not based in the specific country. However, for VAT not related to travel and entertainment expenses, you may have to register before you can claim the refund. A majority of registered businesses are entitled to claim VAT refunds if the expenses are subject to VAT tax. However, various countries have different regulations regarding VAT refund in terms of the items qualifying fora VAT refund and the rates. If you have an EU-based business but its VAT is registered according to your home country’s tax laws, then getting a tax refund is easy – you can see more in this chart. Also, for businesses that are based outside of the EU they need to be registered for VAT in their home country in order to qualify for the business VAT refund.
Business expenses qualifying for tax refunds
There are varied rates and rules held by different countries and it may be difficult to monitor all of the specific applications of them. For example, France only provides VAT refunds on third parties for hotel expenses. The UK only offers refunds on employee hotel expenses, and in Germany you receive a refund on the total amount irrespective of who spent the money. In general, a majority of countries recognize the following expenses as being VAT deductible:
Import logistics and VAT
Installations, maintenance contracts, and drop shipping
Travel delegations, services, intercompany seminars
Professional fees and marketing expenses
Business conferences and trade shows
Taxi expenses and public transportation
Meal and hotel accommodation expenses
Fuel and car rental expenses
Tips for helping your increase the chances of obtaining VAT recovery
Whenever you are filing your VAT refund application for businesses, follow these tips in order to maximize your chances of obtaining a full refund.
Always submit the original copies of your invoices which will have the word invoice printed clearly on the documents. It can be in English or the local language.
Whenever you are making purchases, request more than just the credit card slip and proforma invoice since those are not acceptable for tax refunds.
It is always a good idea to ensure that your business address is on the invoice and not your personal home address.
It is very important to comply with all of the required supporting documents, and if you aren’t familiar with the local laws, get assistance from an expert.
All EU claims should be filed prior to 30th September. Non-EU country claims should be submitted prior to 30th June and ensure the claim is received.
It is very important that all VAT reclaim requirements be satisfied and that any queries from authorities be responded to in timely fashion. Above all, the best thing to do is to start using quality claim management software.