Today, VAT is charged on several business transactions worldwide. While businesses include the VAT on the final price of the goods or services purchased by both individual consumers and business clients, businesses can recover the VAT for most of the transactions.
Basically, if a VAT can be recovered when the transaction is local, international clients can also reclaim the VAT.
VAT recovery across borders
Registered businesses across multiple industries that are subject to VAT can get refunds on the transactions. Nevertheless, the legislation regulating the tax can be significantly different from one country to another. The differences mainly affect the expenses eligible for VAT recovery and the applicable rates among others. As such, the factors involved can be complex and they can change within a short time.
If your business isn’t based in the EU, you’ll need to be registered in your country for tax if you want to reclaim the VAT. However, there are restrictions for a few sectors and countries where collaborative agreements are not existent.
Even when there are reciprocating agreements between the countries, the VAT rules are different and sometimes it can be confusing to understand the applicable rates for each transaction.
Rules for recovery
VAT recovery is not an easy task especially when you are doing business in different countries. Here are some tips to make the process smooth.
- Always ensure you have submitted the original invoices to avoid setbacks.
- Be precise in the request you are making and be clear on the service that has been quoted so that you’ll be sure that the expenses are in a category that is eligible for the refunds
- If your business is based in the EU, you need to submit the request before 30th September but if it is based outside the EU, you should make the claim before 30th June
- Ensure that all your documents supporting the claim are compliant. Since different countries have different requirements, it’s always wise to ask your supplier to correct them whenever possible.
- If any questions arise from the tax authorities, you should always respond in their home language and within the stipulated time-frame.
- Always check to see that your claims have been received by the authorities in the supplier country.
- If your business can afford it, it’s appropriate to incorporate an expense claiming software that can make the process easier by providing real-time visibility.
It’s important to note that most expenses that are linked to business travel attract some VAT. Therefore, businesses are entitled to recover the VAT from the corresponding tax authorities where they made payments. But you should be conversant with the country’s tax laws so that you can make the correct claims.
How long does it take?
With the new regulations, the time taken for the processing has gone down from 6 months to 4 months. However, it’s not uncommon to find that sometimes it will take a longer time to finalize the processing.
If the tax authorities require more information from your business, the process will take longer. There are several service providers that have been offering VAT recovery to businesses and they can help you to get through the process with ease.