Domestic vs Foreign VAT
There are two types of VAT processes within the VAT recovery landscape, domestic and foreign. The type of recovery solution will determine all compliance requirements, rates, deadlines, processes, invoicing instructions and reporting obligations. How do you know which recovery type to implement? Well, that all depends on where the expense took place. Here’s a brief overview of both.
What are the benefits of VAT reclaim for engineering companies?
Unfortunately, VAT reclaim has received a bad reputation for its complexity, often resulting in companies not wanting to invest in the process. However, VAT reclaim can hold significant value for engineering companies, especially when there’s a simple answer to overcoming the common challenges of VAT recovery. The most significant benefits include:
- Cost savings: Businesses can maximize their savings by claiming back a large portion of their input tax on supplier invoices, allowing them to inject extra revenue into their business.
- Increased cash flow: By streamlining the recovery process, businesses can increase their cash flow and scale their business with additional revenue in their pocket.
- Gain a competitive advantage: By maximizing your VAT recovery and simplifying the reclaim process, companies can effortlessly reduce their expenses and offer more competitive prices within their industry.
Who can recover VAT in the engineering industry?
Value-added tax is one of the most common forms of taxation globally and is applied at every step of the manufacturing and supply chain. Although collected by many organizations on behalf of the government, in most cases, businesses are also fully entitled to reclaim and recover the VAT charged by suppliers. Regardless of how insignificant they may appear at first, these costs quickly accumulate. In fact, the global market potential for VAT reclamation alone is $74.9 billion. Your money has also been calculated into that equation, and it’s time to reclaim ownership.
Businesses in the engineering sector can reclaim costs incurred on all local and international eligible expenses, assuming that they comply with the specific legislation and requirements applicable to the country’s specific VAT recovery scheme.
The first step? Identifying your VAT recovery opportunities
Identifying VAT reclaim opportunities in engineering
Although most businesses are familiar with the process of reclaiming local input VAT through domestic VAT reclaims, there is still a colossal opportunity to streamline and maximize the process. In addition, many businesses ace their domestic returns, but leave significant foreign spend unrecovered. Here’s what you need to know about managing and maximizing local and foreign VAT reclaims.
Maximizing domestic VAT recovery in the engineering industry
Even with a plethora of recoverable expenses, up to 54% of eligible VAT still goes unclaimed by organizations. Why? Unfortunately, local transactions are volume and resource-intensive and finance teams are battling to play compliance catch-up. Even if they are able to assess a few (hundred) expenses for eligibility and compliance, the manual processes are unsustainable and prone to human error – causing a significant loss in resources without the assurance of a successful reclaim.
Risky business.
Some of the two most common pitfalls that hinder many firms are regarding either over or under claiming VAT.
The VAT IT Domestic VAT solution offers a way out of the tricky VAT landscape. Our team of experts combine years of field experience and our state of the art tech to help engineering firms reclaim the VAT element of expenses incurred within the country of VAT registration. This includes hunting down eligible expenses, maximizing your reclaim potential and administering all VAT requirements across multiple VAT registrations to ensure 100% compliance.
Feel like you’re too late to the game? Did you know that in some countries, VAT can be reclaimed going back up to five years?
Free up your finance team once and for all, and get paid while you do so. Maximize your savings and recover your eligible expenses on auto-pilot with VAT IT.
Foreign VAT recovery within the engineering industry
What is Foreign VAT?
Foreign VAT, also known as international VAT, is a value-added tax that is included at a country-specific rate on various goods and services. These expenses typically include travel and accommodation, entertainment, transportation, import VAT, and various other international supplier expenses. However, these expenses cannot be recovered in your local VAT processes – but that doesn’t mean they aren’t reclaimable.
Various VAT recovery schemes allow businesses to recover their VAT on international expenses. The Foreign VAT recovery solution focuses on any non-resident company claiming VAT from another country where they are not VAT-registered. This can include claims between EU countries, or non-EU countries claiming from EU and non-EU countries.
Common high-value expenses that are VAT recoverable in the engineering industry
Each industry has a niche scope for VAT reclaim. However, that by no means makes it a small scope. Some common high-value expenses that are recoverable in the engineering industry include:
- Hotels & Accommodation
- Import VAT
- Foreign supplier invoices
- Marketing
- Travel and Entertainment
- Restaurants/food
- Taxi fares and other transport servicesfv
The process of recovering Foreign VAT in engineering
Right off the bat, it’s important to note that there is no standardized foreign VAT recovery process. The treatment, rates, processes, and eligibility criteria will differ depending on the country you reclaim your VAT from. That being said, there are a few general rules that apply to ensure a solid starting point for recovering your international expenses. This includes the following:
- Retaining the original VAT invoices on all transactions
- Completing all official application forms in the local language of the country you’re reclaiming from
- Ensure that you’re charged the correct VAT rates on all invoices
- Ensure that your contractor or supplier is VAT-registered for you to be entitled to reclaim VAT on those supplies
- Ensure that your claim is made within the country-specific deadline
- Outsource the recovery process to experts in the field to ensure you recover the maximum amount
How can VAT IT boost revenue back into your business?
Reclaiming your money shouldn’t force you to compromise critical resources, time, or patience. Replace the redundancy of manual VAT recovery with VAT IT’s centralized solution. Our automated VAT recovery tool combines human connection and digital accuracy to simplify and maximize your VAT recovery. From unparalleled account management and spend visibility to country-specific experts to guide you through local legislation. We do VAT (exceptionally), so you don’t have to.
VAT recovery that’s engineered for success.
