VAT reclaims in Europe – Did you get your money back?

4 min READ

Posted 11. Sep 2017
By Carsten Petry
Carsten Petry
Business Unit Director Vattax

Former Business Unit Director at Norriq and General Sales Manager at Microsoft. Experienced business development director transforming business challenges into digital, user focused solutions - across multiple IT platforms and systems. +25 years of experience within IT-sales and -projects, focused on leveraging technology (ERP, CRM, BI, CMS etc.) into real business advantages.

Did you know that you could get your VAT refunded on most of your travel expenses? This is potentially up to 20% of your travel expenses in other EU countries! And your VAT reclaim from company travel could pay for more than your next Travel Expense Management system?

Today it is estimated that the total European potential EU VAT refund is 7.5 billion Euro, but the actual EU VAT claimed, is only 2 billion Euro.

When an employee of a company in Denmark, is travelling through European countries and has the usual costs of car hire, taxi, hotel, restaurants etc. The chances are very good, that 10 – 20 % of these costs are local VAT, and that all – or close to all – of it can be refunded.

But it is difficult, complex, and takes a lot of time. Therefore, many companies simply don’t bother getting their reclaim done. Many because they don’t know that they can or they don’t know how to do it. Others know that they can, and they might even know how, but the effort needed to make the claim, is too big compared to the potential VAT return amount.

To get the VAT refunded, you need to make a claim to the country where the expense was made. So, you need to organize all your expenses country by country.

First, you need to provide a set of information for each expense. The most important part of this is divided in the following; the merchant (the vendor), who you made your purchase from; this includes details like Name, Address, VAT number etc.

Second, you need a certain code, which describes the type of expense. Was it accommodation? Restaurant? Fuel? Etc. This is complex as there are 209 different codes – but not impossible.

Third, you need to know the VAT rules, to know if you can reclaim VAT fully, partly, or not at all – for each specific purchase.

When you have done this correctly, you must then upload all the information – either into a portal (i.e. manual typing into an e-form) – or by file (pre defined CSV file).

For some countries, and for some transactions, you need to upload the receipt as well.

The EU countries have agreed, that a company must send all EU VAT reclaims to their local TAX authorities (one file per country). So, in Denmark SKAT will receive all your claims, and then they will distribute the claim to the appropriate country.

Understanding the process above – it is easy to see, that a well working Travel Expense Management Solution could be of great help. Both in identifying the possible claim and potentially holding the receipt.

The good news is, that the VAT reclaim probably could pay for the Travel Expense Management Solution.

The processes you need to link together are Credit card payment, Travel Expense transaction, and VAT reclaim. You can have 3 separate systems – but you can also have one connected.

The big problem here is not the technology. It is making the employee use the system – and using it just when the transaction is made. Because if the expense is handled the next day, next week, or at the end of the month, it might be impossible to fetch the necessary data.

The quality of data is also much better, when the employee handles the expense, right at the moment of the expense, when the receipt is in the hand. And it only takes 15-30 seconds. Then it’s done. The Travel Expense is done, the bookkeeping is in reality done – and the VAT refund claim is also done!

In conclusion:

Get a Travel Expense Management Solution, that includes an APP to make life easier for your employee, that includes Milage and Per diem.

If you can find a solution that uses this data to reclaim your EU VAT – then my bet is, that you actually make money all in all!

Happy reclaiming!

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