What is Foreign VAT Reclaim?
Foreign VAT, or international VAT, is a common value-added tax charged to most goods and services. Some countries also call it goods and services tax (GST). It’s added at a country-specific rate and varies depending on the industry, goods and services, and VAT classification.
Suppose a business has international expenses on anything from work-related international travel to foreign supplier spend or global marketing and media campaigns, there may be a portion of VAT recoverable.
These claims can’t be submitted as input VAT returns, so how do you recover the VAT? The foreign VAT recovery scheme enables businesses to reclaim the VAT portion of international business spend without needing to be VAT-registered in the country where the costs were incurred. To do so successfully, companies must comply with the VAT rules, regulations, and processes set by foreign tax authorities across the globe.
Are your Invoices Eligible for Foreign VAT Reclaim?
Although the foreign recovery process hinges on many country-specific variables, there are a few overarching rules in terms of invoicing to ensure accurate and compliant foreign supplier invoices. However, it’s essential to keep in mind that each foreign legislation may have its own relevant deadlines, invoices, and eligible expenses, which is why it’s best recommended to have experts in your corner to help you optimise and maximise the recovery process without risking any non-compliance.
In the meantime, a few general guidelines regarding foreign invoices include the following:
- Be sure to accurately store and retain all eligible invoices. Some countries allow backdated reclaims of up to 4-6 years.
- All invoices must contain the required supplier information (which may include name, address, VAT registration number, etc.)
- Invoices must be made out to your business and not a third party.
- The invoicing and reporting process must align with the country-specific reporting obligations, requirements, and deadlines.
What are Some Common Foreign VAT Reclaim Opportunities?
The VAT reclaim potential differs depending on each industry and the country from which you’re reclaiming.
Common foreign VAT reclaimable expenses include:
- Meetings, events, conferences, conventions & trade shows
- Travel and Entertainment expenses
- Import VAT
- Tooling and molding
- Equipment purchase, rental, and maintenance
- Marketing costs
- Installation of displays
- Hotels & Accommodation
- Foreign supplier invoices
- Restaurants/food
- Taxi fares and other transport services
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