Claiming VAT back is a complicated, time-consuming process even when correct documents are submitted and procedures followed properly. It usually takes 3 months to reclaim VAT, which seems like a lifetime to corporations and small businesses alike. However, if the claim is rejected, it only leads to more complications, which organisations shouldn’t have to deal with. Hence, it makes sense to make sure that every step of the VAT reclaim process goes as smoothly as possible.
Getting the process right means paying attention to small steps, which make a huge difference in a successful or rejected application.
Important tips for claiming VAT back
Having the right documents – Organisations get their VAT reclaim application rejected because the proper documents are not always included in the application. To improve your chances of success, it is necessary to have the following: self-billed invoices with all details, less detailed invoices but only in purchases where tax-inclusive value is £250 in the UK (€250 in DE and €150 euros in France) or less and authenticated receipts for industries where stage payments are necessary.
Have the right name on the application – When claiming VAT back some organisations make the mistake of assuming that the business name must be on the application. This misunderstanding leads to situations where owners attempt to reclaim VAT on goods and services bought for personal use by adding the business name and address to the application.
However, this is a misunderstanding of the law because the law states that only the party that receives the supplies purchased should have their name on the VAT application. It should be noted that there are situations where a purchase can be made to a business but addressed to an employee. But it is strongly advised to have invoices addressed to the business as it avoids extra scrutiny and needless examination from the authorities.
No invoice? – An invoice is one of the most important documents you need to claim VAT. However, that does not mean that every business will have an invoice as proof of purchase. However, it is entirely possible to refund VAT without an invoice provided there is evidence that the purchase was made. There also needs to be proof of reasonable checks conducted with the supplier along with evidence of a commercial arrangement, although this is highly dependent on the tax administration in question. For some tax administrations, an invoice as proof of purchase is a must, otherwise, the claim will get rejected.
Be very precise – When claiming VAT back, it is important to bear in mind that only certain services can be reimbursed. Hence, it is important to be very precise when filling out documentation. The precise nature of the services along with their reimbursement value must be mentioned in the application making it easier to determine if the service is a deductible or not.
Consider each country’s requirements – Even within the EU, different countries have their own requirements for claiming VAT and it is important for organisations to consider these requirements along with the timescale for each country when claiming VAT back. For example, the Czech Republic, Hungary and Romania require the invoice to be issued in the local currency. In Italy, the invoice must include ‘Fattura’ instead of ‘Recivuta’ along with the employee and company names. This is especially the case for business travel, which involves crossing into different borders.
Ask for the right documents at purchase – Submit original copies of invoices in accordance with the language of the country you want to reclaim VAT. Original copies will have ‘Invoice’ at the top of the document in the right language like Factura – Spanish, or ‘Factuur’ – Danish.
Furthermore, if employees make any purchases, ask for more than just the credit card slip and proforma invoice. These documents are not acceptable for tax refunds, so relying on these documents will lead to problems down the line.
Be successful in considering VAT reclaim
VAT for business travel, represents a significant cost for organisations. The average cost of business travel is approximately $949 per person, which amounts to €851. Hence, it is important to successfully reclaim VAT and recoup some of the expense. However, VAT management is a complicated, time-consuming affair and an automated VAT management platform is incredibly useful to many corporations.
VAT4U can be an invaluable asset for many organisations. The cloud-based platform streamlines and organises VAT management to remove the complexities from VAT refunds – thereby improving the organisation’s chances of claiming VAT back.