How to recover Value Added Tax incurred in Europe by foreign businesses in complex cases
Article 3 minute read

How to recover Value Added Tax incurred in Europe by foreign businesses in complex cases

21 August 2019

With the deadline for businesses to file VAT claims approaching, companies must evaluate their individual cases to see if they may require help in recovering these funds.

With international business transactions becoming more commonplace, companies tend to pay Value Added Tax (VAT) in countries where they are not registered or established. Businesses operating in the US, Asia or Middle East that have paid VAT in Europe may be eligible to file claims every year to recover it. The deadline for these businesses to send in applications to recover VAT for 2018 in certain European countries is 30 September 2019. 

While this is a standard and reoccurring process, it must be completed each year or the VAT will be lost. However, some businesses may encounter complex cases, where standard procedures cannot be applied or that have missed deadlines for the standard procedures. In these cases, it is recommended that they seek assistance in navigating the local regulations and intricacies that can occur during the process. 

How to reclaim VAT

Businesses may have paid VAT in European countries through trading of goods and services and travel expenses of employees. The specific expenses that are eligible for reimbursement may differ from country to country so you must be aware of the eligibility for individual transactions. The foreign businesses can file claims to get the money back, but tax authorities in different countries may have varying rules for submitting the applications. This complexity can cause some of the claims to be unsuccessful. The overall process for recovering VAT requires filling out an application form and attaching the applicable invoices that prove the amount of incurred VAT and potentially answering additional queries from the tax authorities. 

There is an increase in complexity if your business cannot follow the standard process, but has to register for VAT instead or the claim was rejected by the tax authorities.

Complex cases 

Some businesses cannot follow the standard process for reclaiming VAT because of transactions they perform and have special situations, which require experts to assist with the process.  

One example of a complex situation involved a US company (Company A) trying to recover VAT after a one-off transaction was completed with a Portuguese entity for the purchase of trading goods. Company A resold the goods to the UK-based customer without any mark up. The Portuguese supplier delivered the goods and the UK customer picked up the goods from the designated location in Portugal and transported them directly to the factory in the UK. Company A received an invoice from the Portuguese vendor with 23% VAT. 

Company A contacted TMF Group for help since it had never been registered for VAT in Europe, wanted to understand its local tax obligations and needed assistance in recovering the VAT paid to the Portuguese supplier. TMF Group analysed the situation and knew they had to help the business by arranging a VAT registration in Portugal, amending invoices already issued and answering questions from the local tax authorities during the process. As a result, the company was successfully registered, met its compliance obligations and recovered local VAT charged by the supplier. A special case, like this example, is when you need experts to help with the reclaim process.

We can help

TMF Group can help your business not only file standard VAT refund claims for 2018, but can also assist with complex VAT recovery cases. Our experts can ensure your business meets all the requirements, properly fills out the correct forms and adheres to the deadline for submission. This can help you to maximize the VAT refund for your business. Talk to us

Learn more about VAT recovery in this episode of the Value Added Talk podcast.
Written by

Juraj Maholanyi

Tax Director

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