Get the VAT back!Back to Forum
Anonymous24 Jun 2011
Although VAT rates have shot up throughout Europe, there is a way for non-European businesses to get some of that VAT back.
This is not just for “big business”: VAT is recoverable on hotels, meals, conferences, etc. and specialists will only charge a percentage of whatever is recovered (no-win no-fee), so this is accessible to any business which involves travelling to Europe.
Now, I am the first to acknowledge that European VAT is not the most exciting of topics (though British comedian Stephen Fry does get laughs from it!), but large numbers of businesses are missing out here and you should challenge your accountants to claim your share of the “European VAT mountain”.
Essentially, there is a little-known mechanism enshrined in European VAT law which allows non-European businesses to recover the VAT paid on purchases made in Europe; yet few businesses are taking advantage of it.
Why now? Thanks to large-scale bungling in Europe, the deadline for internal VAT reclaims had to be deferred by 6 months this year, so attention is turning to this otherwise little-known “cash-machine” in Europe. Moreover, the tax year (in the UK at least) ends 30 June 2011, with a window of just 6 months to make a claim; so non-European businesses should grab this opportunity immediately.
So ask your accountant now – or your Finance Director, or leave a message here – to make sure your business reclaims European VAT and reduces its travel expenses now.24 Jun 2011
Not at all!
Sales between businesses are supposed to be VAT-free, and any VAT paid by businesses is (broadly-speaking) supposed to be recovered by businesses on their European VAT forms. The VAT charge only “sticks” when the public buy the product. It’s laborious, but it’s just how it works in Europe: most European businesses reclaim the VAT paid on their purchases.
To make it a level playing-field, non-European businesses are also entitled to reclaim VAT on their purchases too. But because the mechanism is not advertised, most don’t do it. In fact, it is simply unfair on non-European businesses. They pay taxes which their European competitors do not pay!24 Jun 2011
Binman, This is not tax avoidance. It’s an established refund mechanism to allow non-EU businesses that are not VAT registered in the EU to recover VAT they incur on business expenses in the EU. There is a similar refund mechanism to allow EU businesses to recover VAT they incur in Member States in which they are not VAT registered and most countries outside the EU have reciprocal sales tax refund programmes with the EU.
All businesses are doing is legitimately recovering tax the law says they are entitled to recover.24 Jun 2011
Actually the EU VAT rules for reclamation between member states is quite complicated. For example a UK based company can’t reclaim the VAT on a hotel stay in Dublin because it is exempt in Eire. There are other examples.
Non-EU can of course claim VAT back over a certain value as can tourists of non-EU. Business yes, but tourists I don’t agree with getting the tax back.24 Jun 2011
Yes, it’s a fair point. I stated “broadly-speaking”, because if I started with all the little complications, nobody would want to read it and the system would probably crash!! And we haven’t even mentioned that France only allows a percentage of the VAT percentage to be reclaimed on diesel, for example …
Nevertheless, I believe it is broadly true that if a non-European business submits their European VAT invoices to a suitable accountant, Finance Director or other specialist, there is VAT to be recovered.
Moreover, if the specialist only charges a percentage of whatever is recovered (taking care of the intricacies of VAT law within their own team, so everyone else is not distracted by it), this is simply money that the non-European business would otherwise lose. For those travelling to Europe frequently, it has to make sense to try, don’t you think?24 Jun 2011
Can’t see the US or Canada allowing this. Indeed as a tourist in the US it is not possible to reclaim and Canada make it so difficult it is just not worth it.
However you dress this up it is tax avoidance, it may be legal but it is not right.24 Jun 2011
While yes, it is possible for non EU companies to claim back, it requires an accountant to be able to understand the form and fill in it correctly… Not exactly user friendly. And this supposes of course the non EU company is aware it can claim back…25 Jun 2011
Binman – both canada and the US refund taxes back to tourists, for both goods and services, such as hotels. quite easy to do in regards to canada, very diffucult to do for the US, as it depends whether state or federal tax you are trying to reclaim as to how you go about it.
quick google search will lead you to the government forms to fill out to obtain the refunds.
I dont see it as tax avoidance, as a tax is only for residents of that particular country. in an ideal world the refunding of sales tax to tourist/business boosts the economy of that country as you get more tourists arriving, but i think very few actually take advantage of this as it is confusing and not very easy to do on your own for alot of countries.25 Jun 2011
Binman, This is not tax avoidance. That is akin to suggesting someone who puts savings into an ISA is engaging in tax avoidance.
Tax avoidance (broadly put) is where someone does something for no purpose other than reducing their tax liabilities and seeks to achieve an outcome that is contrary to the spirit and purpose of the legislation.25 Jun 2011
Kevin – yes I agree, using an agent can be much more useful and less time consuming than doing it ones self or getting an accountant. However for small amounts it is not always worth the expence. Like you say if it is regular it can be worth it.
On the tax back for tourists side, most countries you have to spend a certain amount on one particular item rather than a number of items totalling a certain amount. Norway is an example.25 Jun 2011
Iwant to buy an iPad2. UK and Swiss price are the same. Difference is the VAT, Swiss 8%, UK 20%. I’ll buy them in the UK, reclaim the tax and pay the Swiss VAT. I’m 12% better off. As I have to buy 12 the saving is worthwhile and the UK (or at least John Lewis) will benefit.25 Jun 2011
NTarrant – most VAT refund specialists charge only a percentage of the VAT recovered, so it is ALWAYS worth the expense.
For example, our firm charges 20% of the VAT reclaimed, and if your business has £6,000 of hotel expenses, we would reclaim £1,000 of VAT for your business (and deal with any complexities). We would retain £200 for our time, but your business would have an extra £800, merely for separating out the EC expenses and giving them to the VAT refund specialist.
Seems worthwhile, especially when you think how hard businesses have to work to make money in this global go-slow, don’t you think?27 Jun 2011