Hold on to your invoices, folks - they may just be your golden ticket to the foreign reclaim factory. Here’s what you need to know about reclaiming VAT on foreign invoices.
Does your organization frequently attend international conferences, events, or meetings? What about incentive trips abroad or the additional accounts payable from international suppliers? Hold on to your invoices, folks - they may be your golden ticket to the foreign reclaim factory.
Right off the gate, if you’re wondering whether you can claim the VAT portion on international expenses, the answer is a resounding yes! However, to successfully claim foreign VAT, there are a few critical things to keep in mind. First off, look at what foreign VAT reclaim is precisely.
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. However, 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 recover the VAT portion of international business spend without needing to be VAT-registered within the country. However, to successfully recover these costs, companies must comply with the VAT rules, regulations, and processes set in place 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 optimize and maximize 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. However, common foreign VAT reclaimable expenses include:
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