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foreign vat claims

It’s time to start thinking about your foreign VAT claims

Ryan Bevan 22 July 2016 No comments

 

If your business has incurred costs in EU countries where it is not established and not VAT registered, then now is a good time to start quantifying how much overseas VAT has been suffered and decide whether to submit a refund claim. With the average VAT rate in the EU now above 20%, and in the case of Hungary as high as 27%, the VAT cost can be significant and so making a claim is an opportunity not to be missed.

Not all VAT can be reclaimed, for example VAT on entertainment costs, however VAT on the following types of expenditure will typically be recoverable:

  • accommodation and meals,
  • admissions to trade fairs and exhibitions,
  • travel costs,
  • 50% of the VAT charged for hiring or leasing a car,
  • local purchase of goods.

However, it is worth bearing in mind the following points:

  • what can be reclaimed depends on the rules for claiming VAT in the country where the cost was incurred,
  • the rules for claiming VAT are slightly different in each EU country,
  • each EU country has set a minimum amount that can be refunded,
  • if your business makes both taxable and exempt supplies, you may not be able to reclaim all of the VAT you have been charged.

The process for making a claim varies depending on whether the claimant is an EU or non-EU business.

EU businesses

For EU businesses wanting to claim VAT incurred in another EU Member State there is an electronic cross-border refund system. The electronic claims are completed and submitted via the tax authority portal in the Member State where the claimant is established. For example, UK businesses wanting a refund of VAT incurred in other Member States should submit their claims via the HMRC VAT Online Services portal which is available here.

The refund applications can relate to a period from 3 months up to a calendar year and must be submitted by 30 September of the following year.

Non-EU businesses

Non-EU businesses can recover foreign VAT incurred within the EU via the 13th Directive VAT refund process. This is a paper based system and claims are submitted directly to tax authority in the country from which the refund is being sought. Under the 13th Directive VAT refund process details such as administrative arrangements, conditions for submitting claims, time limits and claim periods etc., are left up to the individual Member States. Many EU countries only permit claims if there is reciprocal treatment for the recovery of VAT in the country in which the non-EU business is established.

In the UK, refund claims for non-EU businesses are based on a “prescribed year” running from 1 July to 30 June. The deadline for submission of annual claims in the UK is six months after the end of the prescribed year, i.e. 31 December. Non-EU businesses wanting to reclaim UK VAT should complete and submit HMRC’s VAT65A form.

Given that the deadlines for submitting both types of claims are fast approaching now is the time to assess what claims to make and start extracting the required supporting documentation.

For further information on making foreign VAT refund claims see:

https://www.gov.uk/government/publications/vat-notice-723a-refunds-of-vat-in-the-european-community-for-ec-and-non-ec-businesses