Value added taxes -- the consumption tax levied on goods and services in countries around the world -- can translate to huge refunds for business travelers, corporations and associations doing business and attending meetings and events outside the United States.
According to New York City-based American Express Corporate Services, VAT refunds typically are 2 to 6 percent of corporate clients’ international travel-related spend, yet many firms fail to recover millions of dollars in refunds every year, either because they underestimate their value or they are deterred by the complex rules surrounding the reclamation process.
In Europe alone, only 20 percent of the more than $1 billion paid in VAT is reclaimed, according to the Reston, Va.-based Federation of International Trade Associa-tions.
To understand the basics -- and challenges -- of VAT reclaim, M&C spoke with Britta Eriksson, president of Los Angeles-based Euro VAT Refund (www.eurovat.com), a financial services firm specializing in assisting North American companies in reclaiming VAT.
Q. What countries allow refunds for VAT?
Australia, Canada, Japan and most European countries allow refunds. However, the rules governing who can claim VAT, what exactly can be claimed and the process itself varies from country to country. “The biggest misconception among our clients based in the United States is that all European countries allow VAT reclaim, which simply is
not true,” says Eriksson. “In the Czech Republic, Greece, Italy, Portugal and Spain, it is virtually impossible. You will have to absorb that 17.5 to 25 percent VAT.”
Q. What expenses are eligible for a refund?
Typical eligible expenses include hotel stays, transportation costs (including taxis, trains and car rental), meals, registration for conferences and trade shows, marketing and advertising services, gas, communication expenses (telephone and computer), professional fees and shipping.
Q. What are the VAT tax rates?
Rates vary from country to country and within countries. They can be as low as 3 percent in Luxembourg or as high as 25 percent in Denmark. (See “VAT Update” for more details.)