Although the distancing measures introduced due to the COVID-19 pandemic are gradually being eased, the impact of the pandemic on businesses’ finances remains significant. Therefore, businesses must continue to look for creative ways to increase their revenue, reduce costs and generate immediate cash-flow to support the business continuity. VAT – Value Added Tax – is often thought to be a sunk business cost or too cumbersome to recover. Especially, when such costs are incurred in Foreign countries. However, relatively easily VATBox can support business to process, submit and obtain these Foreign Vat refunds.
The 30 September deadline applies to EU VAT refunds to EU businesses, but also to EU VAT refunds from specific countries to non-EU businesses. Do you believe your business incurred foreign EU VAT during 2019? Then read this article to learn where you can find this hidden cash-flow opportunity for your business.
The time to act is now
30 September 2020 is the hard deadline for recovering 2019 VAT under the EU Directive 2008/9/EC (also known as the 9th Directive and formerly known as the 8th Directive) within the European Union and under the EU Directive 86/560/EEC (better known as the 13th Directive) from European countries such as Belgium, Denmark, Estonia, Greece, Ireland, Italy, Hungary, Latvia, Poland, Portugal, Romania and Spain, if your legal entity is established outside the European Union.
Although the Foreign VAT refund processes are governed by pan-European Union law that directs the individual countries on how to structure the application and refund process, there are still specific country requirements and eligibility to be taken into account. Companies may benefit from some simplifications and extensions in this process as well. VATBox can help you streamline the VAT recovery process to minimise work on your side, communicate with the authorities on your behalf and maximise, using its vast experience, your VAT refund.
Travel & Entertainment expenses potential
VATBox is a data-driven company and therefore is able to provide insights based on multiple millions of transactions.
Businesses can apply for refunds of foreign VAT from foreign countries for common categories of travel and entertainment expenses (hereinafter: “T&E”), including VAT incurred on hotels, transportation, restaurants, events’ organisation, participation in events, cancelled events and hotels, among other costs.
See below VATBox’s statistics on the average VAT potential per expense category for you to relate back to your business and to see where your opportunity lies.
With some countries having VAT rates up to 27%, there is in practice a big scale in rates, refund eligibility and partial refund rules. Our data engineers pulled all 2019 data together and prepared this nice overview that tells you how much VAT can potentially be recovered for a multinational business, simply based on the total relevant cost spend on T&E taking into account a weighted travel destination impact of our Fortune 1000 clients. The 2019 data tells us that your business may reclaim up to 8,5% – on average – of the total T&E expenses incurred. See more details in the table below.
VAT refund out of total potential
|Expense type||Average VAT rate||The average percentage of expenses||VAT Refund potential for overall expenses|
|Total % out of total T&E incurred to be recovered||8,5%|
Foreign VAT in AP and Purchasing cards
T&E is only the beginning. With global operations, the significant potential for foreign VAT recovery is hidden in costs incurred as part of Purchasing Cards (“P-Cards”) and regular AP transactions. Foreign VAT paid for these types of purchases is often fully recoverable, but if not properly processed will move directly to P&L without anyone noticing still fully recoverable amounts and will be written off. We find on a continues basis still recoverable VAT in purchases made for tooling, spare parts, data centre equipment, warranty supplies, drop-shipments, demo- and testing equipment, events and many other types of purchases that stream through the regular AP or P-card process.
Who can benefit?
European Union and non-EU based businesses that incurred VAT in one of the EU Member States.
Especially now some deadlines have been extended and also some countries apply later deadlines for legal entities outside the EU, there is still a window of opportunity for 2019 for Belgium, Denmark, Estonia, Greece, Ireland, Italy, Hungary, Latvia, Poland, Portugal, Romania and Spain.
Good to know
France (incl. Monaco):
Due to COVID-19, the Tax Authorities extended their VAT refund deadline for non-EU established businesses under the 13th Directive from 30 June 2020 to 30 September 2020.
Likewise, the Lithuanian Ministry of Finance extended the deadline for filing VAT refund applications for non-EU established businesses under the 13th Directive to 30 September 2020.
Although Norway is not a member of the European Union, it is worth noting that the deadline for foreign companies to reclaim VAT incurred in Norway is also 30 September 2020.
A non-EU country, but due to COVID-19 the Serbian Government extended the deadline for foreign VAT refunds to 30 September 2020.
How to easily meet the 30 September deadline?
Your Foreign VAT back in 6 steps:
- Be proactive when it comes to cash flow management. Fill out this form to benefit from a free evaluation of your transactional data. Connecting your data the VATBox solution doesn’t require any IT involvement and is a matter of a few simple clicks. The VATBox Recovery solution process your data to provide for a first high-level VAT recovery opportunity.
- Your VATBox Account Manager will provide you access to our portal where you can have a full drill down into the data processed. You will agree on the scope of the legal entities and countries to get the full end-to-end data processing on invoice/receipt level kicked-off.
- In parallel, a Project manager from our Support team will guide you through the required steps and required documents to assign VATBox as your Foreign VAT recovery agent. This allows us to submit the VAT refund application on your behalf, answer any questions from the tax authorities and manage the full refund process.
- Log in to the VATBox portal to find the audit results, benchmarks for your global data sets and a full drill-down into every single invoice image at any hour or any day. The portal will automatically update with every new data set or change within the refund process.
- Ping. You’ll receive a VAT refund approval notification. Within a few days, the authorities will wire your funds to your designated bank account. That is correct; we will not collect any of your refunds, all refunds stream directly to your company bank account(s).
- Start adding up all your newfound revenue, enjoy the executive and full drill-down views and benchmark info made available to you through our portal. The VATBox portal is fully dynamic and provides you with the ability to make data-driven decisions impacting your entire organization and group cash-flow.
If you are already a VATBox client and you still have unclaimed transactional data or want to expand the legal entity scope, then please contact your dedicated Customer Success Manager, or go to the VATBox portal and contact Support.
If you believe you may have data with VAT potentially included for recovery, fill out this form or contact Dennis Ipenburg – [email protected] as soon as possible. We will then connect and process your data as soon as possible to show you your cash-flow opportunity and hard saving.
We encourage you to act promptly and avoid missing the annual 30 September deadline for reclaiming foreign VAT.
Tax Manager, VATBox
Marta is leading the VATBox team that is responsible for Tax Knowledge support for our clients and the communication with tax authorities during the full refund process. Before joining VATBox, Marta was a manager in EY’s indirect tax team. Marta has broad experience in the tax assessment of various types of (chain) transactions, supporting tax audits and implementing VAT optimization solutions. She successfully represented businesses before national tax administrations and administrative courts, as well as conducted numerous tax training activities. Marta holds a Master’s Degree in Finance, Accountancy and Taxation and is a certified tax advisor.
The post The 30 September 2020 deadline is fast approaching for the recovery of foreign VAT refunds appeared first on VATBox.