14 June 2013
Are you ready to apply for your 2012 VAT refund?
Foreign VAT incurred on expenses is often perceived as a cost directly impacting the organization’s profit.
However, you may be able to recover VAT incurred in countries where you are not established or VAT registered, provided you comply with the rules.
Planning ahead, understanding the detailed rules and applying them thoroughly can improve your organization’s chances of success in reclaiming VAT on your business expenses
Who is concerned?
Any businesses which incurred VAT on expenses in foreign countries may be able to obtain a refund of this VAT, depending on the local VAT rules.
In principle, any expenses incurred in the course of the business activities are eligible. However, not every country allows non residents to recover VAT on all business items of expenditure.
Period covered and deadline
As an EU business seeking to recover VAT in another EU country, the period covered by the claim can be either the calendar year or, at least, the calendar quarter.
The deadline to claim VAT on expenses incurred in 2012 is September 30, 2013.
If you are a non EU business seeking to recover VAT in the EU or in other countries such as Switzerland, Norway or Israel, the period covered is generally the calendar year, while certain EU countries accept claims on a quarterly basis.
The deadline for 2012 annual claims filed by non EU businesses with an EU country is generally June 30, 2013, but in some countries a different deadline is provided.
In order to be entitled to claim the refund of foreign VAT, the following conditions under the EU legislation must be fulfilled:
• the claimant has no place of business in the country where the VAT has been incurred;
• the claimant has not performed any supplies relevant for VAT purposes in the country where the VAT has been incurred (in some EU countries, the claimant cannot even be registered, liable or eligible to be registered for VAT)
• the VAT has been duly charged by the supplier;
• the claimant is performing an economic activity which gives him the right to recover VAT;
• the expenses are eligible for VAT refund according to the applicable local rules.
Conditions in non EU countries should be checked on a case by case basis as they may differ.
As an EU business applying for a refund of EU VAT, you will have to file your claim via the internet portal of the country where you are established. For instance, if you are based in Luxembourg, you will have to file your claim electronically via the internet portal of the Luxembourg VAT administration.
If you are a non EU business claiming VAT in the EU you will have to file your claim with the authorities of the country where you incurred VAT. In other countries such as Switzerland, Norway or Israel, a similar procedure is usually applicable but this should be checked country by country.
Using our extensive network of indirect tax professionals, at Ernst & Young we can assist your business in identifying opportunities for VAT claims and help you to develop or improve related business processes to reduce the time and administrative costs associated with making claims and increase your chances of success. For example, we can help you:
• Identify VAT incurred which is eligible for refund;
• Determine whether you have sufficient documentation to support a VAT reclaim;
• Ascertain whether your business is entitled to a VAT refund in the relevant Country;
• Apply for a tax certificate from the domestic tax authorities, when required;
• Review your activities to identify any European VAT compliance issues or possible optimization;
• File electronically or on paper the VAT refund application in the local language, where necessary;
• Communicate with the relevant tax authorities locally.
Download the Tax Alert (pdf, 85.1kb)