Meetings & Conventions: What's Up With VAT? July
What's Up With VAT?
If you’re not filing for Value Added Tax refunds, you’re
missing out on easy money
By Cheryl-Anne Sturken
When the Chicago-based American Bar Association
meets in London next July for its annual convention, the 11,000
expected attendees will find a bonus inside their registration
packets: information on how to reclaim their Value Added Tax.
Similar to a sales tax, VAT is a transaction tax levied on many
goods and services in Europe, Canada, Korea and Japan. VAT rates
vary tremendously from country to country, from 7 percent in
Canada, where it is known as the Goods & Services Tax, to a
hefty 25 percent in Sweden.
Although leisure travelers may claim VAT refunds only on
merchandise purchased, business travelers attending international
meetings, conventions and trade shows stand to reclaim all or part
of the VAT incurred on a host of expenses, including lodging,
meals, registration fees and transportation. VAT on those expenses
also can be reclaimed by U.S.-based companies or associations
hosting international events. Furthermore, companies can claim VAT
refunds on meetings-related expenses such as speaker fees,
insurance, lighting, drayage and signage.
In the United Kingdom, where the current VAT rate is 17.5
percent across the board on eligible expenses, VAT recoupment for
ABA conventioneers, not to mention the association itself, will
amount to much more than small change. Unfortunately, says
Christopher Matthews, press officer for the Delegation of the
European Commission in New York City, the ABA is the exception, not
the norm. "Many companies don't bother filing for VAT because they
simply don't understand how it works," he says.
According to John Powell, president of Seattle-based Corporate
VAT Management, a 5-year-old VAT consultancy and technology firm,
"The biggest problem is that companies either don't know of the
opportunity, or they think it is so complicated it is not worth the
effort." Powell puts the annual aggregate for unreclaimed VAT by
U.S. business travelers and U.S. companies at $2 billion.
To demystify the VAT reclaim process, and to get solid insider
tips on how to conduct business in VAT countries so as to maximize
reclaim amounts, M&C turned to the experts.
Auto VAT, designed by Seattle-based Corporate VAT Management, is
a Windows-based program that is equipped with all the information
needed to file a VAT reclaim in 15 European countries and Canada.
The software generates a completed report that users can submit for
reclaim, along with original invoices and an IRS No. 6166 Proof of
John Powell, president of Corporate VAT Management, says, “Our
technology assumes the user has no idea of how to reclaim VAT. It
holds your hand through each step of the process.”
For information, contact Corporate VAT Management at (206)
What countries allow VAT refunds? As a result
of an international tax law known as the Thirteenth Directive of
the European Union, passed in 1986, roughly a dozen European
countries offer a VAT refund. The directive permits companies that
do not maintain offices registered in an EU member nation to file
for VAT refund. Canada, Switzerland, Korea and Japan also offer
some form of VAT refund.
How can I tell if my company is eligible to claim a
refund? The general rule of thumb is any company not
registered to pay VAT in a country within which it is doing
business (in other words, a foreign company) is eligible to claim a
VAT refund from that country. When filing for a refund, U.S.
companies must submit Internal Revenue Service form No. 6166, Proof
of Entitlement, which establishes the claimant as a bona fide
company legally established to conduct business in the United
States. Form No. 6166 is good for one year from the date of issue.
In Japan, however, foreign companies must be registered with the
Japanese tax authorities to file a claim.
What international meeting, trade show and convention
expenses are eligible? "Trade shows get hit with VAT big
time. So everything, right down to the [cost of the] person who
vacuums the booths at night, is recoverable," says Peter Fleming,
district manager for Meridian VAT Reclaim Inc.'s Southeast office
in Atlanta. Typical trade show and conference costs subject to VAT
are professional speaker fees, signage, lighting, insurance,
move-in/out costs, published materials and rental fees. Fleming
notes, however, that the VAT percentage can vary from country to
What individual business travel expenses are eligible
for reclaim? Business travelers typically can reclaim VAT
on lodging, meals, transportation, car rental and even gas. There
are, however, a few exceptions. France, Ireland and Norway do not
allow VAT reclaim on any individual business travel expenses. As
with trade show and convention expenses, the VAT percentage applied
to business travel expenses depends on the country. (For a complete
country-by-country breakdown of eligible VAT expenses and
percentages, see the chart below.)Refundable
VAT on Business, Conference and Trade Show ExpensesCOUNTRYPROFES-
SIONAL FEESTRADE SHOW
16% or 17%~
* Half of VAT is eligible for
~ Taxi transportation
Source: Meridian VAT Reclaim Inc. (www.meridianvat.com
); as of June
Are incentive trips eligible for reclaim?
Technically, incentive trips are not eligible for VAT reclaim
because they are not considered business trips. Also, keep in mind
that only VAT expenses incurred by employees can be filed; VAT
expenses incurred by guests of employees are not eligible for
refund. Companies filing a claim for the costs they incur to host
an incentive trip should include a formal itinerary of the trip's
daily schedule, highlighting all business aspects, such as sales
meetings and product launches, and submit it on company stationery
along with the claim.
Often, a government will deny a company's claim for VAT rebate,
but that does not mean its judgment has to be accepted. Martin
Pinsonnault, president of TaxPort USA Corp. in New York City, a
6-year-old VAT reclaim company, recalls a claim he made with the
Swedish VAT authorities on behalf on an American insurance company
that had conducted an incentive trip in Sweden. "The claim was at
first refused," he says. "But after we resubmitted it on company
letterhead detailing the attributes of the trip, they offered a
$75,000 refund. That was money back that the company was prepared
to just write off."
What invoices are required to obtain a refund?
Correct invoicing is perhaps the single most important aspect of a
successful VAT reclaim because VAT authorities insist on having
original invoices. Credit card receipts or statements; express
check-out bills from hotels or car rental companies; e-mail
receipts confirming payment, and faxed copies of bills are not
Switzerland adds a twist: VAT authorities there insist proof of
payment accompany all VAT invoices submitted for reclaim. Proof can
be in the form of a canceled check, bank statement, payment order
to the bank, credit card receipt or credit card statement. If
payment was made in cash, the original invoices must be stamped
"paid in cash."
Ask the European supplier to provide an original invoice for
each service, and ask to have the VAT percentage broken out. "Many
times, VAT charges are hidden within an invoice as part of the
overall cost," Fleming says. Also, he cautions, make sure to have
invoices made out to the company that will be claiming the refund,
not the meeting planner who contracted the supplier's service.
To avoid invoicing pitfalls, check each invoice as it comes in.
Do not wait until the conclusion of the meeting or trade show when
nerves are frayed and details tend to get lost in the wrap-up. And
do not be shy about asking that a new invoice be generated.
European businesses are used to dealing with VAT-sensitive
Is a refund still possible if original invoices are
missing? Sometimes, but only if you are lucky and have a
very persistent reclaim company working for you. "If you don't have
an original invoice, you still stand a chance of getting your VAT
back," says Pinsonnault. "It just takes a little longer." He
estimates 10 to 12 percent of all invoices TaxPort files on behalf
of clients are not originals; of those, VAT refunds are issued on
almost 100 percent. "The authorities say 'no,' and we say 'maybe.'
We're very stubborn. It can be done, and there is nothing to lose
Is there a deadline for filing a claim? Yes.
The United Kingdom runs on a July 1-to-June 30 VAT calendar. Claims
may be filed up to six months after the end of the VAT year, or by
Dec. 31. The rest of Europe runs on a Jan. 1-to-Dec. 31 VAT
calendar. Claims may be filed up to six months after Dec. 31, or by
June 30. Some European countries, such as Belgium, the Netherlands,
Ireland and the United Kingdom, will allow retroactive VAT claims
for invoices dating back several years. But, according to VAT
reclaim experts, filing within deadline ensures a faster,
hassle-free refund with fewer queries.
Canada operates on what in the VAT world is known as a "rolling"
deadline. Reclaims on its Goods & Services Tax may be filed
with Revenue Canada up to one year after the date the invoice was
issued. As with European nations, Canada requires original
In need of information on VAT
reclaim or shopping for a reclaim service? The following resources
Delegation of the European Commission
3 Dag Hammarskjold Plaza
305 E. 47th St.
New York, N.Y. 10017
Fax: (212) 688-1013
Visitor Rebate Program
Summerside Tax Centre
Summerside PE CIN 6C6
International VAT Association
Attn: Peter Wilmott, chairman
Prisma Transport Consultants
523 Ave. Louise, Bte 24
1050 Brussels, Belgium
(011) 3-22 647-4263
Fax: (011) 3-22 647-2153
TaxPort USA Corp.
599 Lexington Ave., Suite 1204
New York, N.Y. 10022
Fax: (888) 298-8297
Meridian VAT Reclaim Inc.
125 W. 55th St.
New York, N.Y. 10019
(212) 554-6700; (800) 727-4VAT
Fax: (212) 974-0673
Customs & Excise VAT Overseas
Customs House, P.o. Box 34
Londonderry BT48 7AE, N. Ireland
(011) 44-150 437-2727
Fax: (011) 44-150 437-2520
(For lodging reclaim in U.K.)
How long does a refund take? Refund fulfillment
varies from country to country. Expect five to nine months for a
first-time claim, provided the claim was filed on time with all the
necessary invoices. Otherwise, expect a check in three months.
How does a VAT reclaim service work? The No. 1
benefit of using reclaim companies is that they are familiar with
the ins and outs of each nation's legislation and work with
partners in the country in which the claim is being filed. VAT
reclaim authorities tend to process claims in their language, and
having a local go-between ensures key questions are not lost due to
VAT reclaim companies get involved in as much or as little of
the refund process as clients request, from complete on-site
auditing, preparation and filing of a VAT reclaim to simply
checking a client's self-prepared claim for accuracy.
Another benefit of using a qualified VAT reclaim service is that
because successful refunds are their bread and butter, these
companies push for VAT legislation that benefits their clients. "We
had a client that imaged their invoices on microfilm and didn't
keep any originals," says Fleming. "We were able to present an
argument on their behalf to the United Kingdom's VAT authorities
that the client, a first-time claimant, was unaware of the invoice
rule. It was finally accepted, and now a precedent regarding
microfilming of invoices for special cases has been set in that
Larger VAT reclaim services belong to the 40-member
International VAT Association, based in Belgium (see "Expert
What do VAT reclaim services charge? Fees
depend on client needs, but the industry average, according to
Fleming, is roughly 20 percent of the VAT recouped, although it can
run as high as 40 percent. Almost invariably, when no refund is
issued, no fee is charged.
Meridian VAT Reclaim Inc. is so sure of its ability to obtain
VAT refunds, it recently began offering corporate clients the
option of a prepaid program. For an additional fee of 5 to 6
percent, depending on the country in which the claim is being
filed, Meridian will prepay a refund to the client one month from
the date of filing.
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