Importance of Reclaimable VAT to Businesses
People always look for the best ways to make more money, whether working full-time jobs, investing in stocks or cryptocurrency, or creating a business online. In these progressive digital times, opportunities are endless especially with the growth of e-commerce and mobile applications to assist in every transaction. Due to the vast expansion of cyberspace, businesses can now go beyond their shores and move across countries. However, going global includes dealing with other businesses and those often include taxes.
Having and dealing with a business is no easy task in this modern world with all its upgrades and fast-changing industries. Every company has its spending for operations and other expenses, and some of these have value added tax added in them. Not many people know that a percentage of the tax on a majority of these expenses, especially those on travels, accommodation, seminars and food for the purpose of business can be reclaimed. When you’re a growing business, these conveniences and savings go a long way when accumulated.
A business may spend a lot of money on travel and accommodation in a foreign country. Most of these services are given an additional VAT charge above the cost of the services. With a rise in the amount of imports and exports globally, value added tax or VAT has gained much more importance with the modern business. However, the VAT for those expenses can be reclaimed if the company files for tax reimbursement.
Tax laws are difficult to understand and many companies end up with tax fraud issues, due to the lack of understanding of these laws. Recent improvements in tax technology have enabled hassle-free VAT reclaim proceedings with the help of mobile applications. Most of these options provide the business with an opportunity to retain some of the funds that they have invested for business growth.
Business Expenses and Reclaimable VAT
You can save VAT on accommodation and expenses in business trips. For many companies, their annual travel budget is mostly consumed by the accommodation expenses of employees. These expenses can be VAT deductible in most countries. We can reclaim VAT on accommodation expenses incurred in some foreign European countries like Germany. For more information on Reclaimable VAT click here.
Companies can also file for reclaimable VAT on car rentals from certain countries, especially in Europe. Like in most VAT processes, the original invoice copy needs to be submitted in order to attain the VAT reclaim. Applications mostly have to be submitted to the local authorities within a specified period of time to be approved. Generally, 50% of the VAT expenses for car rentals are reclaimable.
Employees registering to enter Fairs, Exhibits, Seminars and Trade Shows get charged it is treated as VAT deductible. Several countries offer this VAT recovery. To obtain this refund most countries have an online portal where you submit the necessary information in the native language of the foreign country.
During a business trip, VAT can be reclaimed for the employee’s food and restaurant expenses; the exact percentage varies from one country to another but the process is fairly easy if you have VAT reclaim system already on board. Some VAT reclaim systems are in the form of software or mobile applications that can easily be installed in any gadget available. These solutions are easier to understand than having to study an entire tax system for a certain country.
Other VAT Reclaimable Expenses
Businesses can save on import VAT and logistics. VAT is usually levied on imports into the country and these can be reclaimed if the goods you have imported is for business use. Filing for import VAT is a bit though as the amount of paperwork required is quite large. However, for a registered business, this process is very lean. You can also take the help of VAT software and online platforms to reclaim Import VAT.
If you happen to throw a party for the client or if you take your client out on any sporting activity, it can be considered a business expense. Business entertainment can be termed for several activities as well. You can usually reclaim tax on 50% of your spending on entertainment. This amount might be insignificant for the short term, but it will help in your long-term savings.
Generally, all these reclaimable VAT is ignored by business as the process involved in VAT recovery is quite difficult. Almost 5.5 Billion Euros of unclaimed VAT are annually written off by companies. For an SME or small to medium enterprise it would mean at least a 20% savings. Every business should be aware of its rights to VAT expenses reclaim.
Author: Spin Feed Technologies
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