Reclaiming VAT on entertainment expenses

When diving into the VAT reclaim potential for a specific business, a common reclaimable expense often comes up as 'entertainment' expenses. But what exactly would these expenses look like, and are you eligible to reclaim the VAT portion on them? This article looks at recoverable expenses within business entertainment and what the recovery process entails. 

What are entertainment expenses exactly? 

Regarding VAT reclaim opportunities, most businesses only scratch the surface of eligible expenses they can rightfully reclaim. Entertainment expenses, for example, are one of those expense types that frequently slip under the radar. This is because even upon attempting to define 'entertainment costs,' most people experience their first roadblock. 

Fortunately, we're here to help clear up any confusion. 

Business entertainment is a tried and tested way to cement relationships within and outside an organization. However, it doesn't always come cheap - which is why many businesses are interested in whether or not they can reclaim any of the VAT incurred on some of these expenses. But we need to set the groundwork first. 

For starters, entertainment expenses usually involve food and drink, accommodation, tickets to entertainment events, or payments made to event organizers for business hospitality. 

So, which of these expenses are eligible for VAT reclaim? There's no short answer to that. In brief, each tax system is subject to its own rules and regulations regarding what constitutes as deductible entertainment spend. Most countries, however, agree that business entertainment expenses do not follow the same VAT treatment as employee entertainment. Therefore, most businesses prefer taking on the reclaim process with experts by their side to ensure they comply with the local legislation surrounding entertainment expenses and the relevant claiming process and timeline. 

In the interim, here are a few things all businesses should consider when reclaiming the VAT portion of their entertainment expenses.

Prepare for some accounting

Bulletproof accounting systems are essential for businesses that are navigating the VAT reclaim landscape. Before starting the reclaim process, all expenses must be tracked and visible from a financial point of view. This includes collecting and keeping all invoices from suppliers and vendors with the correct information associated. Most organizations should provide you with VAT invoices or receipts where VAT is charged.

Determine eligibility and rates

Rarely do expenses come sealed in a neat little box. More often than not, finance teams need to hunt down expenses from various countries, and entertainment expenses have a knack for hiding in the most uncommon places. However, even after all expenses have been identified, reviewing their eligibility within the country you're claiming from is critical, but time consuming. Each VAT system will classify different entertainment expenses as deductible, depending on the purpose, type of expense, and industry. To add to the mix, VAT rates also vary depending on the country. 

Follow deadlines and regulations

Apart from tracking expenses, checking eligibility, and maintaining all the correct documentation, it's all covered, right? Not quite. When reclaiming VAT on local or international expenses, organizations must comply with each applicable tax jurisdiction's relevant deadlines and regulations, which can quickly become an administrative burden if taken on without expert guidance. 

Is it worth it? You bet!

To say VAT reclaim is complex would be a dramatic understatement. However, that doesn't mean it isn't worth it. With the right team, you can effortlessly reclaim the eligible VAT portion on local and international travel and entertainment expenses without the headache, hassle, or heavy lifting. Our team of VAT recovery experts and our AI-driven reclaim tech provide risk-free and error-proof recovery solutions that help you reclaim your VAT, time, and resources. 

<<Administer and maximize your VAT potential>>