With international business being so commonplace today, reclaiming VAT has become an integral part of business life, both for the average employee and for a company’s financial manager. The process itself can be cumbersome and complicated, and there can be many pitfalls along the way.
In order to smooth out the bumps along the road as your company works on reclaiming their VAT, every employee must be involved in the process. They must understand their role, be aware of what they need to do and what to look for, and how to finalize their part so that reclaiming VAT at the end of the year is quick and easy for all involved.
VAT recovery is a roadmap, and there can be many twists and turns along the way. It’s important to know what to look out for as you go through the VAT process.
Unorganized Record-Keeping – Has an employee ever approached you with a pile of receipts, with no real sense of organization? Has ink rubbed off and you can no longer make out the address, phone number, or VAT code of a business? If so, the receipt can become useless and ineffective for accurate paperwork. It is important that your employees get into early habits of maintaining a good paper trail, whether it’s a digital-based trail or organized in a document holder. The best way to do this is to keep the receipts supported immediately upon receiving them or have a program that allows you to scan them on your laptop or smartphone so they won’t get lost in your pocket.
Timing – Each country has different filing guidelines, many governed by how much VAT is owed or when the transaction took place. These dates affect when each VAT refund needs to be filed, and if you miss the date, you could either miss out on your VAT refund or face fines for not filing the documents on time.
Wrong information – The receipts and information slips submitted for VAT refund must be correct, from the date to the correct company name, to the VAT code of the business and to the breakdown of the expenses. The submission of wrong details can lead to major fines, and therefore it is essential that all forms are filled out correctly. Check out our Business Travel Guide to VAT with some guidelines that will ensure that your organization can reclaim the VAT rightfully due.
Unusual purchases– There is no other way to say it: VAT guidelines are complicated. Certain expenses are fully reclaimable, while others can only be claimed if they are for business opportunities only. Not only that, but there are a number of transactions that can be included in VAT returns that are unintentionally omitted because people are not aware that they can expense them. There are also items that involve complicated transactions or recordings, such as property, equipment, charitable donations, among others. If there is anything you are not 100% positive can be claimed for VAT, consult a professional before including it on your return statement.
International guidelines – Every country has unique VAT guidelines, even within the EU. Some expenses will be recoverable in one country, while the same expenses might not count in another. It’s important to be aware of filing deadlines, but also the differences of what can be claimed in each country. In addition, some countries require expenses to be listed in local currencies as well as Euros or Pounds. Make sure you know what your filing country, or countries, require. A number of EU countries are currently in the middle of a test period that will simplify cross-border transactions. While this does not eliminate individual taxes, it is an attempt to ease the sale of goods and services across country lines. If you find yourself doing business in any of the countries listed in this document (as the test program is active until 2018), it is worth seeing if your company is eligible to apply for the consultations under these rulings.
Not knowing the different types of VAT – In the UK, for example, there are three different VAT schemes. Each one meets the needs of different businesses, and you need to make sure you take advantage of (or qualify) for the right scheme of VAT. Otherwise, you will not only be submitting incorrect information to the authorities, but you could end up costing your company both time and money.
Hire a reliable VAT manager – When it comes to reclaiming VAT, you need one person (or a team of people, depending on the size of your business) who can oversee the VAT recovery process and make sure you get your full business VAT return. No matter what systems you have in place, there needs to be someone with an eye for detail who combs through all the details and understands as much of the process as possible.
Establish internal systems – Automating a system for your VAT expenses is an easy way to keep your company on track, but that doesn’t mean your employees are absolved of their responsibility. Make sure that they understand the importance of keeping track of their VAT and have internal regulations put in place so that there is no confusion when it comes to reporting VAT details.
Greed is not good – Always play it safe when submitting your VAT invoices. Be sure what you are submitting to your financial manager is valid and legal, and meets the general regulations for each filing country. For example, if you are filing for a VAT refund in the UK, and there are errors with your forms, or you have underpaid or over-claimed your VAT, you can end up paying substantial charges for your errors – up to 100% of what you were originally going to have reimbursed.
The best pointers of all – Ask questions, do your research, and stay on top of all of the necessary information. The better organized you are from the start, the more successful your VAT filing will be.
If you want to make sure that your VAT reclaims are getting processed quickly and according to the local rules and regulations, choose a VAT tool that you know you can rely on. VATBox’s automated technology has helped businesses around the world improve their VAT recovery rate. VATBox’s technology provides complete transparency to the VAT recovery process and always stay up to date on the latest technology and regulation changes. VATBox can help ensure that your company is always in compliance with the latest VAT laws and always has access to the most current VAT-related information.