Frequently Asked Questions.
Advice and answers from the Taxback International Team.
What is Value Added Tax (VAT)?
Value Added Tax (VAT) is an indirect tax levied on the supply of goods and services that can add between 5 – 27% to your company’s business travel expenses. It is levied at every stage in the business cycle, itemised on the invoice and paid to the government in each state with the cost ultimately borne by the end consumer. VAT was established to encourage cross-border trade from one county to another and was designed to be neutral to the business if they go through the effort to recover their foreign VAT.
Applicable VAT rates vary from country to country and the tax is recognised under different names, including IVA (Italy), GST (Canada, Australia), MWST (Germany, Austria), TVA (France, Belgium) and MOMS (Scandinavia).
How much VAT can businesses reclaim?
Generally, businesses can reclaim the majority of VAT paid on eligible expenses, subject to fulfilling nominal criteria. The applicable VAT rate varies from country to country, as does the list of eligible business expenditure.
In some cases, only a partial recovery of the VAT amount paid is allowed. These partial recovery expenses are usually related to passenger cars, accommodation, meals and business entertainment. For example, Belgium refunds 50% of VAT paid on the expenses related to passenger cars, while in Denmark businesses can only claim back 25% of the VAT they have been charged on meals.
Why can businesses reclaim VAT?
In order to encourage international trade, the European Union introduced legislation in the 1980's enabling businesses to claim back VAT paid on expenses incurred while doing business in member states. VAT is refunded within the EU under the EU VAT refund directive, which enables EU companies to reclaim from any member state; the 13th Directive, allowing businesses established outside the 28-member block to reclaim the VAT from the EU territories.
A number of key non-EU territories, including Australia, Japan, Canada, South Korea, also refund VAT/GST/consumption taxes to the non-resident traders via specific refund procedures or under reciprocity agreements in place. For more information please contact Taxback International on firstname.lastname@example.org
Can Taxback International help my business if I am already registered for VAT?
International VAT can be complex, time-consuming and challenging. Our international team of tax specialists will ensure that your VAT is managed in the most effective, cost-efficient and law compliant way.
- We can maximise your VAT refund by reviewing your domestic T&E expenses retrospectively for a number of years (Domestic VAT recovery),
- We can ensure that your current in-house VAT system covers all necessary aspects by carrying out a VAT compliance review, VAT expense review or Expense code review,
- We can train your staff on various VAT related topics,
- We are your reliable adhoc VAT consultant.
What do businesses need to do if they are registered for VAT?
Companies have a number of obligations in the jurisdiction they are VAT registered in, such as issuing compliant VAT invoices, keeping proper records, filing VAT returns and other tax declarations on time. Engaging Taxback International to assist you and perform these activities for you will ensure that your business is VAT compliant.
Where are the benefits of VAT registration?
VAT registration is a lawful obligation that is imposed on businesses carrying out taxable supplies in a particular jurisdiction, subject to conditions. Businesses that are eligible or liable to VAT register in a country are not entitled to apply for a direct VAT refund from that country. However, once your business has become VAT compliant by registering for VAT, it is also entitled to claim back VAT on purchases which it would otherwise not be able to get back.
When your business chooses Taxback International to assist you with the registration and subsequent filing and reporting obligations, you will be confident that your business is VAT compliant in that jurisdiction.
Can I get VAT back if my business is registered or required to be registered in the country where business expenses are incurred?
Yes. You can still get the VAT back by reporting the VAT on purchases in your VAT return in that country. This may result in either over-payment that could be claimed, or in a VAT credit that can be offset against VAT liabilities.
When should my business be registered in another country?
Your business is eligible or liable to VAT register in another country if you are carrying out taxable supplies in that country, and the obligation to account for VAT is not shifted to your customer.
This may include selling goods over the internet into another country. The obligation to register for VAT depends on a number of factors, such as the type of service performed, destination of the goods, status of your customer, etc. There are also VAT thresholds that apply.
For more information, contact Taxback International on email@example.com
What are the advantages of using Taxback International?
Taxback International combines innovative technology, deep industry expertise and value-added partnerships to deliver comprehensive VAT solutions that maximise your VAT reclaim and minimise your risks, so you can focus on growing your business. More than 12,500 clients choose Taxback International because of our unique and innovative approach to VAT Financial Services.
Is there a minimum claim threshold?
No. Taxback International does not operate a minimum claim threshold, we will recover all the VAT possible to put back into your bottom line - no matter how small.
However many tax authorities impose such a threshold which we shall comply with. In most EU countries the minimum requirement for an annual claim is €50 and for a quarterly claim, it is €400. There is no maximum amount which can be claimed.
How much does the Taxback International service cost?
At Taxback International we offer a free VAT Analysis of your expenses, letting you know how much VAT you can recover from the expenses your business has incurred. Our VAT recovery solutions are designed to fit the unique needs of companies of all sizes, offering market-leading pricing options tailored to your needs. A tailored price quote will be provided based on the specific needs of your organisation.
How long does it take to receive a refund?
All tax refunds are issued on discretion of the tax authorities. This being said, for claims submitted under the 8th Directive your organisation’s VAT must be refunded within 4 months of the submission of the application. For claims submitted under the 13th Directive and other reciprocity rules, this period may be longer. Actual processing time at Taxback International can also vary from country to country. Taxback International’s Clean Claims Policy means we only submit claims that have been verified as accurate, saving tax official’s time and ensuring continued strong relationships with foreign tax offices, resulting in faster refunds for your organisation. Depending on where your costs have been incurred, you may receive your VAT refund in as little as four weeks.
What documents do I need?
Taxback International can manage your organisation’s reclaim process when you supply the following documents to us:
- Copies of the invoices to support your VAT claim,
- Letters of Authority authorising Taxback International to represent you before foreign and/or local tax authorities,
- Certificate of Taxable Status (where required) proving that your organisation is a registered taxpayer in your home country,
- The originals of the invoices where required by the Tax Authorities. These will be returned to you after processing your refund claim.
What information is needed on a VAT compliant invoice?
Depending on the type of application, an original or scanned invoice is needed to support your claim. Where scanned invoices are acceptable, they should be submitted electronically with the application. All original invoices should be kept as they may be requested at a later date by the member state of refund. If original invoices are required to support your VAT refund claim, they must contain the following criteria:
- Invoice number;
- Invoice date;
- Date of the supply of the goods or the services;
- A detailed description of the goods/services provided – the quantity and nature of the goods supplied or the extent and nature of the services rendered;
- Unit price(s);
- Total net taxable amount per VAT rate;
- The VAT rate applied;
- The VAT amount payable;
- Gross invoice amount.
What countries offer VAT refunds?
Taxback International provide foreign and domestic VAT reclaim in all countries where there is a refund mechanism, among them all 28 EU member states. The list includes: Australia, Austria, Belgium, Bulgaria, Canada, Canary Islands, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Holland, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malta, Monaco, Norway, Poland, Portugal, Romania, Serbia, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Turkey, and United Kingdom. Visit our VAT chart section to get more information on reclaiming VAT from these countries.
What type of expenses can I claim a VAT refund on?
Businesses can reclaim VAT on a range of eligible expenses, which can be defined in three different groups:
- T&E (Travel & Entertainment Expense) relate to business expenditure incurred by travelling employees while doing business abroad. Typical T&E would be accommodation, meals, transport costs, marketing costs, costs incurred in relation to participating in an event, an exhibition or a conference, etc.
- AP (Account Payable invoices) itemizes a transaction between a buyer and a seller and typical examples would relate to professional services, equipment, consulting & legal fees, research & development.
- IC (Intercompany Expenses) refer to internal transactions between two associated companies who file a consolidated tax return or financial statement. Good examples would be office expenses, legal costs, cross-border sales/indirect goods, administrative/financial support, international project, international infrastructure charges, warranties and so forth.
In all cases, the incurred expenses shall be justified in terms of the nature of the business and this is what normally the tax authority requires the claimant to prove.
Typically, T&Es are paid through the medium of company credit cards, issued for all travelling employees and in some extremely rare cases – in cash. This is why we have designed a solution allowing credit card data transactions to be analysed so that we may provide our clients with a VAT opportunity report, even before we have reviewed the invoices (scans or originals).
AP and Intercompany invoices are normally covered through a bank transfer between the organizations.