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What Businesses Should Know About VAT



The concept of VAT is one that all businesses with clients or international operations in Europe and other countries around the world need to understand, as is VAT recovery. VAT stands for the Value Added Tax in the European Union and other countries, and it’s a general consumption tax added to goods and services. It broadly applies to all goods and services purchased and sold to be consumed in the EU. However, that means that goods and services that are sold to be used outside of the EU aren’t subject to VAT.


This general tax is meant to place the burden on the consumer rather than the business, and it’s charged as a percentage of the price. VAT was implemented in the EU to offer simplicity and transparency in the tax system, which had previously lacked consistency from country to country. The rates for VAT range from 0% to 27%, but for businesses who have clients who work in the EU, they can recover VAT.


With that being said, many companies don’t, and it’s reported that billions of dollars are not claimed in VAT recovery every year. Using expense claim software can be one of the simplest and best ways to recover VAT, which will be detailed more below.


The following are some additional things companies should know about VAT and VAT recovery.


What is VAT Recovery?


VAT recovery is an option for domestic businesses and foreign businesses, and there are also specific goods and services that may be exempt from VAT altogether including exported goods.


If you want to reclaim VAT and you’re outside the EU you need original invoices and to complete an application form, but it may take some time before you receive the refund.


Keeping VAT records are extremely important, whether your business actually operates in the EU, or you just have clients there, and your employees do business there from time to time.


It’s Not Just Europe


It’s important for businesses to realize that it’s not just the EU where VAT is charged. Many of the other countries where business is done charge VAT including Australia, South America, Canada, China, and India.


Software Solutions


VAT and VAT recovery can be really complex scenarios, so the best thing global businesses can do is invest in a robust expense management platform. You should look for an expense management solution that will allow you to deal with the complexity of international tax jurisdiction easily and in one streamlined place.


This is a good way to keep track of everything you’ll need regarding VAT, and if your business is based in the U.S., VAT recovery.


The reason software is necessary is because there are tricky rules and ins and outs that are important to know here. For example, you may be able to recover VAT for a meal you had at a restaurant on a business trip, but there may be exceptions depending on what the intentions of the meeting were and where the client was from.


An expense management solution lets your employees take the frustration out of dealing with complex international tax rules, and lets them focus on the business at hand.