How to Simplify Your VAT Reclaim Program

In a world characterized by global, fast-moving markets, changing business models, and the increasing prevalence of transaction-based tax, keeping pace with compliance can be a challenge.

Each year, on average, businesses leave 44% of potential value-added tax (VAT) revenue on the table when it comes to travel and expenses. Without a doubt, this area represents a valuable source of hard-earned savings for your company.

Now is the perfect time to simplify your VAT reclaim process!

In this blog, SAP Concur specialists and Deloitte Tax LLP (“Deloitte Tax”) explain how VAT impacts employee expenses, as well as discuss certain planning that may be available to assist taxpayers in recovering the VAT that’s incurred.

What is VAT? 

VAT stands for value-added tax, which is also known in some countries as a goods and services tax (GST). It is a consumption tax levied in more than 160 countries, excluding the U.S.

How does VAT impact your business?

Like sales tax, VAT is borne by the final consumer on purchases bought within the relevant country. However, unlike sales tax, VAT is applicable throughout the entire supply chain, not just at the end, and is the responsibility of each business within that supply chain to collect VAT from its’ customers and remit it to the relevant tax authorities.

Is your business failing to reclaim thousands of dollars?

Each business in the supply chain can usually recover the VAT it is charged with if it’s making “onward taxable sales.” The VAT incurred in relation to exempt sales, for example, financial services and some land-related transactions, is often not recoverable.

Don't forget about VAT incurred on employee expenses!

When traveling outside the U.S., your employees most likely pay VAT on a portion of their business travel and expenses (T&E). However, many businesses take this as a cost because of the complexity in implementing the proper processes to recover it from the local government. 

Phil Flynn, senior manager for Global VAT Services at Deloitte Tax LLP explains that “many businesses simply do not respond to these allowances and fail to put in place policies to make the’ process easier. Other businesses choose to hire an outside firm every year to complete fee-based refund claims – services that can become rather expensive when looked at over several years.”

In addition, many multi-national, U.S. corporations have foreign subsidiaries, who incur VAT on local expenses. VAT in these cases is typically recovered through the entity’s local filing system for VAT return.

Automate VAT recovery to increase savings

“It’s one of the best-kept secrets for companies to save money,” said Hendrik Vordenbaeumen, CPO for SAP travel and expense solutions. Michelin was able to recover $3.9 million in just three years with VAT automation.

With automated VAT reclaim, you can:

• Remove the manual gathering and transferring of data and managing reports.
• Eliminate recurring costs from outside providers to perform success fee-based assessments.
• Optimize tax savings with thorough data analysis of T&E transactions, considering key VAT recovery factors like entities, transaction dates, and countries involved.
• Offer direct integration with travel systems, such as Concur Travel, empowering your workforce with real-time alerts and visibility into upcoming VAT opportunities.
• Recover VAT through integrated apps.

See how an automated solution can simplify VAT recovery and improve cashflow by visiting us online.

About Deloitte

Deloitte Tax’s U.S.-based Global VAT Services practice has more than 50 team members with experience spanning the Americas, EMEA, and Asia Pacific regions dedicating to serving US-based global businesses. The team has deep experience of assisting clients with designing VAT policies and procedures for T&E expenditure to streamline the reporting and recovery process, as well as requirements gathering for expense technology implementation projects. 

The Global VAT Services practice is supported by Deloitte’s Global Indirect Tax network, comprising the member firms of Deloitte Touche Tohmatsu Limited (DTTL) and their affiliates around the world. This network contains over 1,500 Deloitte VAT professionals in approximately 150 countries. 

For more information about Deloitte Tax’s VAT services relating to T&E, please contact Phil Flynn at phiflynn@deloitte.com.