Claiming VAT: A guide for businesses

Public service announcement: VAT can get complex and tricky to navigate, especially regarding the VAT opportunities for scaling businesses. However, considering that VAT reclaim can become a significant additional revenue stream, no business can afford to ignore it for much longer. That’s why we’re spilling the beans on the basics of claiming VAT for businesses. Here’s what you need to know to ensure you’re on the right track and on your way to significant VAT recovery that doesn’t steal your time, money, or peace of mind. 

Where are your expenses taking place? 

For the sake of simplicity, all VAT reclaim processes boil down to one core question: “Where are your business expenses taking place?” Allow us to explain. There are two overarching types of VAT reclaim solutions; domestic and international VAT reclaim. The most significant difference is that domestic VAT reclaim processes include all business expenses within a country where a business is VAT-registered. In contrast, foreign (or international) VAT recovery offers businesses an opportunity to claim eligible expenses as an overseas business claimant without necessarily needing to register for VAT or make taxable sales within the country. 

Administering VAT processes

Right, so you’ve identified your expenses, and it seems like it’s complicated, to say the least - we get it. However, administering multiple VAT processes is key when it comes to maximizing your VAT potential. Without the right processes in place, businesses often run the risk of either overclaiming or underclaiming VAT. Not only does this drain critical resources, but incorrect claims or non-compliance can easily raise suspicion amongst the relevant tax authorities, leading to potential fees and penalties. That’s why businesses must invest in solutions that optimize and streamline the VAT processes on their behalf. What’s all the fuss about? Let’s look into it. 

• Multiple VAT registrations

If your business makes taxable supplies or has an establishment within a country, it may be subject to mandatory VAT registration. In short, this will then fall into your domestic input VAT reclaim scope. However, to add to the boiling pot, each country will hold you liable to its own deadlines, invoicing instructions, regulatory requirements, and eligibility criteria - all critical in ensuring compliance (and successful claims).

• International VAT processes

Although you may not be required to register for VAT overseas, each country is still subject to its own VAT rates, eligibility criteria, VAT system, and regulatory requirements in order to claim foreign VAT. Not to mention return deadlines and reporting requirements. Therefore, businesses must be informed and in the loop with all local VAT processes within the country they claim from as a non-resident business. See how things can get messy? Especially considering most tax authorities require processes to be handled in their native language - yikes.

Eligible expenses

Regardless of whether you’re tackling local or international VAT, each jurisdiction is subject to its own list of eligible expenses, depending on your industry, country, and specific taxable activities. Fortunately, most businesses only scratch the surface when it comes to claiming eligible expenses, meaning there is a significant opportunity to tap into a reclaim potential that competitors may not be aware of. So, as a business owner, it’s imperative that you deep dive into what you can rightfully claim within the specific VAT recovery type (or ask us). In addition, many businesses should not be incurring VAT on specific goods and services, but due to insufficient data or lack of knowledge, the VAT is paid anyway - not ideal. 

You don’t need to know it all to reclaim it all

Fortunately, you don’t need to be a VAT expert to claim back what’s rightfully yours. At VAT IT, we love VAT, so you don’t have to. Our experts in local and foreign VAT processes handle the entire process to ensure that nothing slips through the cracks. Our state-of-the-art technology also streamlines and optimizes the administrative burden of multiple VAT processes so you can free up your finance team without compromising compliance or your refund yield. 

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