Do you incur VAT on overseas business costs?
Did you know that not all foreign VAT you pay needs to be suffered as a cost? There are mechanisms in place which enable both EU and non-EU businesses to recover VAT on certain costs that are incurred in EU countries where they are not VAT registered (and not established/incorporated).
There are conditions which must be met in order to be able to make a claim and not all VAT can be recovered, for example VAT incurred on customer entertainment costs.
Typically the following types of business-related costs are recoverable though:
- accommodation and meals for employees,
- admissions to trade fairs and exhibitions,
- travel costs (where VAT is applicable),
- 50% of the VAT charged for hiring or leasing a car, and
- local purchases of goods used for business purposes (e.g. phone/laptop chargers).
VAT incurred by EU Businesses
Since 2010 EU businesses have been required to submit their foreign VAT refund claims electronically via the portal of the tax authority of the Member State in which they are established. The VAT refund applications can relate to periods from 3 months up to a calendar year and must be submitted by 30 September of the following year.
VAT incurred by non-EU Businesses
Non-EU businesses are also able to recover foreign VAT incurred within the EU via what is known as the 13th Directive VAT refund process. There are certain requirements that must be met for a claim to be valid and the expenditure on which VAT can be reclaimed can vary from EU Member State to Member State.
Under the 13th Directive VAT refund process details such as administrative arrangements, conditions for submitting claims, time limits and claim periods etc., are left up to the individual Member States.
In the UK, VAT refund claims for non-EU businesses are based on a “prescribed year” running from 1 July to 30 June. The deadline for submission of annual claims in the UK is six months after the end of the prescribed year, i.e. 31 December.
So, now is a good time to start working on your foreign VAT refund claims to ensure you meet the relevant deadlines.
The average EU VAT rate is now over 20% so don’t miss out on the opportunity to reduce your overseas VAT costs where possible.
For further information on making UK VAT refund claims see:
You can learn more about the deductible and non-deductible VAT in our VAT blog articles here: