Perhaps you’re already aware – or perhaps not – but fact is, that in a lot of businesses, large amounts in foreign value added tax, that isn’t reclaimed, is just lying about throughout the organization. And who’s okay with just letting money lie on the floor, if I may ask? As a VAT registered business, you’re entitled to reclaim foreign VAT, and it’s a topic that I know is on the radar with many CFOs and Finance Managers. Most of them are in fact aware that it involves money, that’ll directly impact the bottom line. So why do we still see so many businesses that doesn’t bring these money home? And what does it take to get hold of the money? I’ll provide a few insights into this topic here.
A troublesome process
The main reason for not reclaiming the foreign VAT, that a business might have paid in various contexts, is simply that it’s a complex and cumbersome process to deal with. The process will quickly become confusing and time-consuming, which is why many organizations omit to spend time dealing with it. The result is that huge amounts of money will stay with the tax authorities in the different countries. And they’ll keep the money safe and sound – or will they?
Especially the fact that the VAT often must be reclaimed from multiple countries has an implication on the complexity of the process. The procedures and rules are typically different from country to country. This means different application requirements, documentation requirements, control processes, deadlines and follow-up procedures. All this stuff makes it a hard job to get the money back.
20 billion euro!
Research within the area shows that almost 20 billion euro is left unclaimed across the world every year. In other words, that’s the total amount that businesses hold off from reclaiming. To put that figure into perspective, it costs around 24 billion euro a year to the keep the Danish healthcare system running. We’re talking a lot of money here!
Even though most finance people have this topic on their radar, then some might think that their share of the 20 billion euro is so vanishingly small, that it isn’t worth the trouble. Obviously, the potential for a given business correlates with its size and it’s amount of international activity. However, remember that if this cash is collected, it goes straight to the bottom line.
How to get the money – without the hassle
VAT refund can be obtained for many types of costs that your business might have abroad. A large part of these costs is related to the expenses that occurs in connection with business travelling. We’re talking about accommodation, food, car rental, domestic transport etc. Especially if your business has international activity and employees with frequent business travel, I’ll guarantee you, that the potential is there.
momsen er, hvis du selv skal gøre det. De gode nyheder er dog, at du rent faktisk kan få disse penge retur uden alt besværet. Det kræver ganske enkelt bare de rigtige værktøjer og de rigtige samarbejdspartnere:
- Find and implement a digital expense management system.
- Make sure that the solution has functionality to handle foreign VAT refund.
- Watch your bottom line grow.
The costs, where foreign VAT reclaim is applicable, can, with great advantages, be handled in a digital expense management tool. One of the advantages is that the documentation needed towards the respective tax authorities becomes readily available. The leading expense management providers can then automatically share this information with a service provider, who’ll manage the whole reclaiming process.
At Acubiz, so far this year, we’ve managed to send back more than 400.000 euros to our customers. If you’re keen to dive deeper in this subject, you can head over to our knowledge bank and get our e-book – The ultimate guide to foreign VAT recovery for businesses.
Make sure, that you get your money back!