How Domestic VAT reclaim can increase your business cash flow
17th September 2020: Is your company optimising the huge opportunity that can come from Domestic VAT reclaim?
What is domestic VAT reclaim?
Domestic VAT reclaim (DVR) is the recovery of VAT on domestic travel and expense (T&E) transactions such as hotels, accommodation, meals, entertainment etc. This is typically reclaimed monthly or quarterly and provides regular cash flow into your business.
A number of countries also allow you to reclaim backdated VAT on local business spend. In some countries, you can reclaim up to 5 years.
See our full fact sheet on reclaiming backdated Domestic VAT here.
The domestic VAT reclaim challenge for companies
VAT rules and filing requirements for companies are constantly changing. Especially now during COVID as Governments are reducing local rates to support trade and the local economy.
Another challenge for companies is keeping their ERP systems updated with all the correct VAT changes. This is always a complicated process but even more so now with teams working from home.
Companies also miss Travel and Expense (T&E) domestic VAT opportunities, as many domestic expenses do not flow through the standard ‘procure to pay’ process. Examples include all T&E spend, P-Card spend, events, car hire services and other spend captured outside the main ERP system.
60% of companies submit VAT returns that are non-compliant
We work with major global enterprises, and as a first step complete Domestic VAT Health Checks for companies who are either using a competitor or filing themselves. Our insights have found that many companies are not making full or correct domestic VAT reclaim submissions to their local tax office.
Four consistent issues emerged:
- VAT was deducted but not valid, therefore non-compliant with Tax Office laws
- VAT was incorrectly deducted and thus ineligible, resulting in companies reclaiming a high amount of ineligible VAT
- VAT that was eligible, was not deducted resulting in a loss in the reclaim for the company
- All smaller expenses were missed as they were regarded as too difficult to reclaim on or the company didn’t have enough resources to manage the amounts of these small transactions
We found over 60% of companies were submitting VAT returns that were non-compliant, and therefore they were risking fines from the Tax Office and indeed Tax Audits.
Significant revenue was lost because the company was both incorrectly reclaiming Domestic VAT and not including all eligible receipts.
What are the benefits of working with Taxback International?
This is a fully indemnified solution that removes the potential of fines or penalties from the tax authorities.
Taxback International has 20+ years’ experience dealing with all global tax jurisdictions. We understand all of the local VAT practices in over 180 countries to guarantee full compliance with tax legislation while maximising your company’s VAT reporting and deduction on domestic business spending.
Our fully-managed process for identifying and reporting compliant VAT amounts makes it easy and quick for your business to deduct the correct amounts of VAT in your VAT returns. We will ensure that all eligible domestic business spend is included, no matter how small or how many.
Get started with us
Taxback International can provide you with free analysis, which will highlight where we identify missed Domestic VAT opportunities within your VAT process. This analysis is free and requires no commitment from you.
Should you decide to proceed to work with us, there is a minimal effort from you!
We integrate with all Expense Management Systems meaning there is no IT implementation needed. We do all of the analysis, preparation and provide your report in the style required by your local tax office for inclusion in your local VAT return.
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