Up to 20% VAT Recovery on Business Travel is Possible

It may surprise some business executives to know that when they travel internationally for business to VAT-refunding countries, they’ve been paying Value Added Tax (VAT). This VAT expense can be refunded, amounting to significant savings. We’re here to enable you to unlock significant savings via VAT Refunds on Business Travel, accommodation, and more. VAT refunds are an important part of optimising business expenses. Let’s start with an overview of VAT.

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What is VAT (Value Added Tax)?

Proposed originally by the German industrialist Wilhelm von Siemens in 1918, Value Added Tax or VAT has become an important part of the Tax structure and Fiscal Policies in many countries. France was the first country to introduce VAT in 1954. It is the most important source of revenue for France today and forms almost 50% of its revenues. Other countries were quick to add VAT to their own Tax structures.

VAT Rates Around the World

Most countries in the world today charge Value Added Tax, as part of their fiscal policy. It is a Tax that even visitors to such countries have to pay. The Tax is unavoidable. VAT can be as high as 25% in some countries. Every hotel stay or restaurant bill involves VAT.

The Scandinavian countries charge the highest rates. In some countries, different services or goods, attract different rates of VAT, making things complex. VAT rates normally vary from 5% to 25% depending on the expense (our free online VAT calculator takes this into account). Fortunately, many companies become eligible for a VAT refund on the business travel of their employees. This is where the VAT refund process comes into play. Let us take you through it.

What Are VAT Refunds For Businesses?

VAT Refunds can be obtained for business travel expenses. — VAT that has been paid on business travel expenses can be refunded

VAT is a consumption tax levied at various stages of production and distribution. Businesses from non-VAT countries can reclaim VAT paid on certain business-related expenses incurred during international travel. Coromandel SAS is here to help you with reclaiming VAT in such instances.

We should note that it has nothing to do with VAT recovery related to Leisure travel or personal shopping. We are NOT talking about VAT refunds to tourists on their purchases.

Seeking Foreign VAT Refund on Business Expenses - The Opportunity!

Most companies today seem write off VAT as an expenditure. This is not what they should be doing.

Instead they should reclaim the VAT amounts paid as part of their Travel and Entertainment (T&E) expenses bringing them significant gains! Most companies do not seem to realise that these amounts (up to a fifth of the expense) can be recovered from their expenses, quite easily.

If you would like an instant estimate of what volumes of VAT refund will come back to your company, you can use the Coromandel SAS VAT Refund Calculator. You may indeed be surprised!

EU VAT Directives

Many countries (mainly in Western Europe) refund VAT. In the EU, there are two important Government Directives that govern VAT refunds. They are the 13th and 8th Directives. The 13th relates to refunding countries that refund to non-European Union (EU) countries. The 8th Directive is concerned with EU member countries refunding to other EU countries.

Some VAT Refunding Countries

Among the countries that refund VAT are: Austria, Belgium, Denmark, Finland, France, Germany, Japan, The Netherlands, Norway, South Korea, Spain, Sweden, and the United Kingdom.

The Rule of Reciprocity

Not all countries refund to every country around the world. Some apply the rule of reciprocity. In other words, they will only refund to travellers from countries, who refund to their own business travellers.

Various Expense Categories for VAT Refunds on Business Travel:

Business expenses under several categories are eligible for VAT refunds.

Here are some everyday items on which VAT can be refunded:

Hotels
Car Rentals and
Meals
Business Entertainment

Additionally, other categories that are eligible for refunds are:

Banquets
Meetings
Seminars
Conferences
Training
Exhibitions and Trade Shows
Legal
Advertising
Research and Development (R&D)
Technical Fees, and many more

Note: Not all categories are refundable in all countries.

Several governments refund VAT. Many companies, unfortunately, do not claim their refundable Value Added Tax. Subsequently, Millions of dollars that can be refunded each year, are never claimed. It is difficult to understand why. In some cases, it may just be ignorance about VAT refunds. With other companies, it could point in the direction of inadequate internal processes. It is a saving option that is up for grabs.

Our Recommendation:

I would strongly recommend businesses seize the opportunity to reclaim VAT. The savings gained from reclaiming VAT could enable employees to travel more on international business within the existing budgets, or could simply be added to the company’s bottom line as additional profits. Reach out to us if you’re interested in knowing more.

How Can Companies Recover VAT on Business Travel?

Value Added Tax — Convert the paper in your files, to hard cash

There are two ways to recover VAT paid when on international business travel:

The company can use its own Tax Department (if they have one), to file for VAT refunds.
Alternatively, they could employ a VAT recovery company to recover their refundable VAT, on their behalf.

The former can be a lot of work and time-consuming for a number of reasons. Different governments have different regulations and often, even completely different processes. The documentation involved can be quite different as well.

I would recommend that a company outsource the filing process: appoint an established VAT recovery company with a good recovery record to do the work. There are no upfront fees that the corporate would have to pay. The VAT recovery company would just deduct the mutually agreed service fee, upon successful recovery of the refundable VAT.

Can The VAT Refund Process Be Done Online?

A few countries today have switched to the online digital way of handling a VAT refund. Unfortunately, they are only some European Union (EU) and Scandinavian countries. A few countries are well into automating the process, but the refund process has not been completely automated. The rules and regulations continue to be complex.

Several EU countries have committed to going the electronic route. However, as of date, have not introduced the change. Implementation dates have been moved back in several cases. Click here to read about the automation of the process.

Are There Deadlines For The Submission of Value-Added Tax Refund Claims?

Yes, each country has a deadline for the submission of VAT refund claims. The dates for VAT refund claim submission may differ between countries, but is an important aspect to be aware of.

For example: The financial year in the UK is from July to June of the following. The UK will give an applicant an additional 6 months to submit the claim. The deadline for submitting to the UK, will be December 31 for the preceding UK fiscal year. On the other hand, most European countries will have the deadline on Jun 30 for the preceding fiscal year (usually 01 January to 31 December).

Deadlines may vary from one country to another, for VAT refund applications that are entirely submitted within the European Union.

Choosing a VAT Recovery Company. How to Choose?

Below, you will find a very useful list of questions to ask the VAT recovery company before settling on a VAT recovery service provider. The answers to these questions will prove useful in determining the VAT recovery company that is the best fit for the corporate.

How long has the Company been in the VAT refund business?
What is the percentage of successful recovery? (percentage between submissions and recovery)
How many countries can they recover VAT from?
Will they handle the registrations that some VAT refunding countries may require?
Do they have any upfront fees?
What do they do when an invoice/receipt with a large VAT value is rejected by VAT authorities? Do they have an internal process to work around the issue?
Are they able to go beyond VAT refund on routine business travel? For example, can they handle VAT refunds on Accounts Payable invoices.
Do they provide online summary reports on what has been submitted, recovered, and what is in the pipeline?
Do they provide clients with an Account Management service?
How quickly will they pay when VAT has been refunded?
How will the payment be made?

If you found any of these questions useful and if you need more information, connect with us today

Reclaiming VAT - The Conclusion

Sometimes the process of Value Added Tax refunds can become part of a Corporate Travel RFP, and the company can leave it to their Travel Management Company (TMC) to deal with the VAT refunds. Many TMCs today have arrangements with VAT recovery companies to handle the process for their clients as part of their Travel Management service.

Investing a little time in choosing the right VAT recovery company to handle your VAT refunds could go a long way in the successful recovery of VAT. At Coromandel SAS, we handle VAT refunds and can help you in this process. Contact us today.

I would personally urge you, as a business entity, not to leave your refundable Value Added Tax unclaimed. Refundable VAT invoices/receipts have a limited shelf life for the refund process. After the stipulated deadline passes, you will have lost the opportunity to convert paper into cash. Why on earth would any business wish to throw money away? Do convert the paper in your files, to cash. Allow us to help you to do so easily, with minimal hassles.

VAT & VAT Reclaim FAQs

What is Value-Added Tax (VAT), and where is it applied?

Value-Added Tax (VAT) is a consumption tax applied to goods and services at each stage of production or distribution. It is commonly used in the European Union and many other countries worldwide. However, the United States does not implement VAT. For businesses involved in international travel, understanding the VAT refund process can result in significant cost savings.

Can businesses claim VAT refunds for international travel expenses?

Yes, many countries offer VAT refunds, but there are strict deadlines and documentation requirements for submitting a claim. It’s important to familiarize yourself with the specific rules of each country to ensure compliance and successful refunds.

What is the rule of reciprocity in VAT refunds, and how does it work?

Some countries apply the rule of reciprocity for VAT refunds. This means if Country A refunds VAT to businesses from Country B, then Country B will refund VAT to businesses from Country A. Spain and Germany are notable examples where this rule is applied.

Who is eligible for VAT refunds on business travel expenses?

VAT refunds on business travel are only available to companies whose employees travel to VAT-refunding countries for company-related purposes. The refund is always issued to the company, not to individual employees.

Can company owners claim VAT refunds for their own travel expenses?

Yes, if the traveller is also the owner of the company, the VAT will be refunded to the company they own. Again, refunds are strictly issued to the company and not to individuals.

Are there deadlines for filing VAT refund claims in different countries?

Yes, every VAT-refunding country has specific deadlines for filing refund claims, often based on their fiscal year and VAT laws. Missing these deadlines can result in losing eligibility for the refund. Contact us for details on the deadlines in countries relevant to your business.

What documentation is required to submit a VAT refund claim?

Proper documentation, including original invoices and receipts, are essential for submitting a VAT refund claim. Each country may have additional requirements, so it’s best to consult a VAT specialist for guidance.

How can I check if my invoices are eligible for VAT refunds?

In most cases, invoices are eligible for a refund on the VAT component. However, to confirm eligibility, we need to review your invoices. Reach out to us for assistance in verifying your documents.

In which currency are VAT refunds paid, and how are they processed?

VAT refunds are typically issued in the currency of the original payment. Refunds are often transferred to the bank account of the VAT recovery company managing the claim, which will then convert the amount to your preferred currency based on the applicable bank rate.

Is the VAT refund process complicated, and should I use a specialist service?

The process is not inherently difficult but involves many rules, regulations, and strict deadlines. Engaging a specialist VAT recovery company can streamline the process and reduce the risk of rejection due to errors or incomplete submissions.

How long does it typically take to process a VAT refund?

Most VAT refunds are processed within 90 to 180 days after submission. However, processing times can vary depending on the VAT authorities and their response times.

Why do VAT refund processing times vary across different countries?

Processing times depend on the efficiency of each country’s VAT authority and their workload. Some countries may have faster systems, while others may experience delays due to higher volumes of claims or administrative procedures.

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