European VAT recovery
Companies doing business abroad often incur foreign VAT on invoices. These businesses cannot recover this VAT through their own domestic returns. For example, a Spanish company receiving hotel bills for staff visiting Germany cannot reclaim the German VAT through their Spanish VAT return. VAT Recovery is the process of reclaiming this foreign VAT back.
What VAT can be recovered
- Each country implements its own rules on what can be reclaimed from abroad. Typical costs include:
- Hotel and accommodation
- Restaurant meals
- Exhibition, event and conference costs
- Marketing and promotional costs
- Diesel / petrol
- Road tolls
- Car rental
- Equipment and tooling purchases
- Certain professional fees
The rules vary enormously between countries. Below is a downloadable summary for major European countries.
How can VAT be recovered
Since the start of 2010, as part of the EU’s ‘VAT Package’, there is a new system for companies to recover their foreign VAT. This requires registering with local tax authorities on an ‘electronic portal’ to submit a single claim for all countries.
This is a complex and confusing procedure:
- Claims are often only successful if they are basic and require limited review time by the foreign authorities.
- If there is a query or hold-up on the claim, many VAT authorities can be very reluctant to deal with the home state tax authorities of the claimant.
The rules in different countries are not uniform for reclaims (see above), and change frequently.
For example, in the UK entertaining costs for staff are deductible, but disallowed for clients; however, in France it is the reverse!
It is a requirement that the non-EU company’s home state has a reciprocal VAT agreement. Some countries require a Fiscal Representative to be in place before granting non-European companies refunds, e.g. France. Also, claims must still be submitted on a country-by-country basis, often requiring local language and procedural understanding.
- EU VAT compliance
- Invoice requirements EU VAT
- Triangulation EU VAT registrations
- Supply and install of goods for European VAT
- Reverse charge on EU VAT
- Electronic VAT invoice requirements
- VAT Recovery
- EU VAT returns
- EC sales list (ESL)
- 2019 Intrastat reporting thresholds
- Intrastat declarations
- Importing goods and EU VAT
- Call off & consignment stock VAT
- VAT information exchange system (VIES)