5 mins | August 1, 2023

Claiming VAT in the consulting industry

Explore the reclaim opportunities available within the industry

Fact: your consulting firm has significant cash lying on the table, waiting to be recovered. So, why are so many consulting firms not reclaiming their money when it’s within arm’s...

Claiming VAT in the consulting industry

Explore the reclaim opportunities available within the industry


Fact: your consulting firm has significant cash lying on the table, waiting to be recovered. So, why are so many consulting firms not reclaiming their money when it’s within arm’s reach? Better yet, what would it mean for your competitors if you could reclaim a portion of your business expenses that they struggle to recover themselves? 

Every year, millions of euros go unclaimed within the consulting industry. Why? The recovery process is prone to complexities, and navigating through these challenges is often time-consuming and resource-intensive. However, despite these challenges, the more likely reason, behind the significant amount of unclaimed VAT, could be that although there is a vast amount of eligible expenses, most of them stay under the radar and are completely missed by finance teams. 

So, how can your consultancy firm bypass the challenges and tap into the hidden VAT opportunities within your industry? That’s why we’re here. 


Can your consulting business recover VAT? 

Absolutely! Most industries are eligible for VAT recovery. However, not all have the same reclaim potential. Consulting firms are one of the industries with a significant VAT reclaim scope, and businesses within this sector can recover VAT on eligible expenses incurred up to 27%. 

The reclaim opportunity falls within two overarching categories: Domestic VAT and Foreign VAT. In brief, domestic VAT recovery includes all business expenses filed via your local input tax processes. But what about costs incurred outside of your VAT-registered country? Cue Foreign VAT recovery. 


Domestic VAT recovery

Foreign VAT

Domestic VAT recovery is the process of recovering VAT on local business expenses within countries where you are VAT-registered. This can often include multiple countries. Ultimately, Domestic VAT recovery aims to maximize a business's domestic input while optimizing processes, complying with local tax law regulations, and improving cash flow.

Foreign VAT recovery is a solution that is tailored towards non-resident entities within a foreign country. It enables companies to claim VAT incurred on international invoices and expenses without becoming VAT registered within the country they are claiming from. 


Although consulting businesses may be able to rightfully reclaim VAT on domestic and foreign expenses, there are a few requirements to ensure compliance and eligibility, such as: 

  • Business expenses incurred must be in line with their business activity. 
  • Businesses must comply with the VAT treatment of their specific recovery scheme.
  • Businesses must follow country-specific invoicing instructions and reporting requirements. 

Managing and maximizing the domestic VAT reclaim opportunity as a consulting firm

Although there are many eligible costs for consulting firms to recover, the finance teams often need more time to review and assess high-volume invoices. Although businesses may be well-familiar with the process of submitting invoices for input VAT returns, the challenges become more complex to deal with as your business scales. 

Many consulting firms may manage multiple VAT registrations. Is it time for a VAT health check? Let’s take a look at the most common blindspots when recovering domestic VAT in consulting. 


Overclaiming VAT

Underclaiming VAT

As the list of eligible expenses become increasingly complex, many firms run the risk of overclaiming VAT. Claiming VAT on non-claimable expenses leads to rejected claims, opportunity loss and potential audits and penalties. 

VAT opportunities can be challenging to track down. Often, projects don’t exist from a financial perspective, or teams are unaware that they can claim input VAT on a variety of hidden expenses. This leads to underclaiming VAT and essentially declining a significant revenue boost. 


Fortunately, you don’t have to settle for chasing after paperwork or sub-par returns. Maximize your refund yield while managing the entire administrative process with experts by your side. By outsourcing the local VAT processes to VAT IT experts your team can sit back and relax while we extract all the required expense data, hunt down invoices and documentation that may not be in your T & E files, and help you to achieve 100% compliance.


Foreign VAT reclaim opportunities for your consulting business

Foreign VAT recovery ensures that your business recovers a portion of VAT by complying with VAT rules, regulations and processes set in place by Foreign Tax Authorities across the globe. This means that businesses can reclaim costs in countries where they conduct business activities without being VAT-registered in the relevant country. What can you reclaim? Here’s a quick look: 


Conferences, events, meetings, and tradeshows

Consulting businesses conduct numerous business trips over the course of the year - but are any of the costs incurred returning to your pocket? Rarely. Consulting businesses are eligible to recover VAT on their conference, event, meeting, and tradeshow spend. This includes VAT on event registration, attendance fees, transport costs, and accommodation.


Common high-value expenses that are VAT recoverable in the consulting industry

Every business has its own unique expenses. Regardless of how insignificant they may feel at first, they inevitably stack up, impacting your bottom line. More often than not, these expenses are VAT recoverable. In the consulting industry, additional high-value expenses that are eligible for recovery include: 

  • Hotels & Accommodation
  • Restaurants/food
  • Taxi fares and other transport services

What’s hindering VAT recovery in consulting

If VAT reclaim can inject such significant savings into your business, why are more firms not tapping into successful VAT recovery's financial and competitive advantages? Unfortunately, there are a few common pitfalls that hinder the recovery process. Here are a few to look out for. 

  • Businesses are unaware of their reclaim potential and can’t identify eligible expenses
  • Finance teams are stretched and can’t accurately review and assess high-volume invoices for compliance and eligibility 
  • Incorrect invoicing instructions
  • Changing legislation across the industry VAT scope

Fortunately, businesses don’t have to settle for the administrative burden of navigating these challenges to ensure successful VAT recovery. Instead, by tagging the VAT IT experts in your corner, you can rest assured that your business mitigates human error, stays up-to-date with the latest legislation, frees up your finance team, and maximizes your recovery all in one go. 

So, where does it all start? 


How to claim back foreign VAT in the consulting industry

At the very crux of the recovery process lies one fundamental task: invoicing. To initiate a successful recovery process, the first and most crucial step is to keep a correct track record of all expenses. Business owners can do this by collecting the physical invoices or uploading the invoices onto a system that stores the invoices instantaneously, like the VAT Cloud. However, not just any invoice will do. All invoices must comply with country-specific rules and legislation. Although there are county-specific invoicing requirements, there are a few standard guidelines to keep in mind to ensure accurate VAT charges on foreign supplier invoices. 

  • All invoices must contain the required supplier information (this may include name, address, VAT registration number, etc.)
  • Invoices must be made out to your business, and not a third party, for VAT to be reclaimed
  • The invoicing and reporting process must align with the country-specific reporting obligations, requirements and deadlines

Not 100% certain about your reclaim readiness in terms of invoicing instructions? No worries, we’ve got you (re)covered. Our VAT IT experts and state-of-the-art tech will assess and review all invoices to ensure their reclaim readiness. If we spot a red flag on an important invoice, our reissues department will contact your supplier to reissue the invoice and obtain a compliant one. 


What is the process to claim Foreign VAT on Travel and Entertainment?

Travel and Entertainment spend can quickly stretch the budget. Fortunately, the scope for recovery is large and includes almost all costs incurred during business travel, including accommodation, restaurants, transportation, and entertaining clients. However, despite having the correct documentation, the process heavily depends on the country where the expense is incurred. In addition, various tax laws and regulations govern the recovery process, and businesses must comply to ensure maximum VAT recovery. 

Depending on the VAT Directive and the country-specific requirements, your VAT recovery will hinge on submitting your VAT application within the country’s statutory deadline and per their reporting requirements. Moreso, certain countries may have reciprocity with other countries, determining whether or not your business can rightfully claim in the country. 

Fortunately, we know all the nuanced regulations and country-specific requirements, so you don’t have to.


How VAT IT elevates your business finance

VAT IT has spent decades researching and perfecting the VAT recovery process for our clients in consulting. With our extensive network of clients, we’ve established a world-leading understanding of the intricacies of VAT reclaim within the consulting industry. Rather than settle for resource-intensive processes that don’t bring much to the table, allow the VAT IT team of experts to help you identify, assess and maximize your VAT recovery while providing unparalleled account management and spend visibility. 


One centralized solution for all your VAT needs.

VAT refund Tool kit

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Discover which countries your business can reclaim from with our country guides.
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Evaluate your VAT reclaim potential based on your annual Travel & Entertainment expenditure.
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Navigate the intricacies of your invoices. Use our interactive tool to find out what is required to optimise your claims.
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