Value-Added Tax (VAT) is called different names in countries around the world. For example, the acronym is GST in Canada, MOMS in Sweden, MwST in Germany, TVA in France, and BTW in the Netherlands. Essentially these acronyms all refer to the same thing--a consumer tax that is charged on many types of business transactions.
Fortunately, most countries in Western Europe, Canada, and more recently Korea, have adopted legislation that allows U.S. businesses and individuals to recover VAT paid on services. With rates ranging from to three percent to 25 percent, VAT is a significant factor that must be considered when preparing your meeting budget. But before applying for a refund, you need to determine your organization's eligibility to reclaim VAT.
Three reclaim methods exist in Europe: The 13th Directive is for non-European companies and is the most common filing procedure for American organizations, the 8th Directive is for European companies incurring VAT in countries outside their country of residence, and the 6th Directive is for VAT-registered businesses.
If you are planning a meeting for your own company employees, you will probably be eligible to file a 13th Directive claim. This involves sending original invoices to the authorities in the country where VAT was paid. Your claim will be audited and, once approved, a refund will be issued.
If, however, you are organizing a meeting or conference where individuals and companies will pay a fee to attend, VAT registration may be required. You will be required to obtain a VAT number in the country where the event is held and charge VAT at the appropriate rate to the meeting attendees. Once registered, you will be able to recover VAT paid on business expenses associated with holding the event.
Outsourcing VAT Reclaim Because of the complexities involved in applying for refunds, many companies and associations outsource the VAT reclaim process. The scope of services provided by these companies varies and many do not charge a fee until your refund is issued. A VAT reclaim agent will help cut through the red tape and will handle the administrative tasks, including the processing of original receipts, corresponding with the various VAT authorities, and completing paperwork in local languages.
Reclaim agents are familiar with the rules that govern the filing process--especially important for organizations wishing to recover VAT associated with an event where an attendance fee is charged. To achieve maximum savings, be sure to consult an agent when you are in the planning stages, before you send out invoices for the attendance fees.
The rules for VAT reclaim are different in each country. Although VAT is charged on most transactions, it is charged at varying rates and not all VAT is eligible to be refunded. Recoverable items vary from country-to-country, but may include site fees, catering, equipment rental, shipping costs, labor, hotel accommodation, and meals and transportation costs. The repayment period is six to eighteen months from the time that all documentation is submitted--depending upon the country. Most countries will accept as many as four claims per year from one organization.
If your company already has a VAT reclaim program, be sure to include your invoices in the corporate-wide filing. (Check with your tax, travel, and accounts payable departments to find out if your company is already recovering VAT.) Claimants must provide proof that they are a taxable enterprise outside of the country where a claim is being filed, and applications for refund must be completed in the official language of the country. Refunds are issued in the local currency of the country where the VAT is reclaimed.
There are also many common rules across the borders. An original VAT invoice from the supplier where a service was purchased must be provided as evidence that VAT was paid. Credit card receipts, statement of charges, duplicate invoices, and photocopies are not accepted for refund. Only a VAT-registered company can issue a valid VAT invoice, and invoices must be issued in the name of the company filing for refund.
When using a consultant to help you organize a meeting or other type of business event, the bill from the consultant to your company will not be valid for VAT reclaim, unless the consultant has a VAT registration number. Further, when entering into a contract with a third party to assist you in planning the event, make sure that the interim supplier is willing to provide you with the original back-up invoices issued by the foreign service providers in your company's name.
VAT reclaim is a cost savings measure that planners can't afford to ignore!
Each country allows a one-time opportunity to recover VAT paid on past expenditures. The retroactive filing period can range from one to ten years. An audit must be performed on company files to identify eligible VAT receipts for past expenses.
Most meeting planners send original invoices to the accounts-payable department for payment, so be sure to involve accounts payable when you begin your VAT reclaim investigation.
Costs associated with a meeting may have been billed to your organization in one of three ways. So you will need to look in three separate areas of accounts payable to find the original VAT invoices:
* Expenses such as site fees, room rentals, catering, shipping, materials, and labor will be centrally billed to your organization and can be found in your payables files.
* Employees attending the event may be responsible for paying their own hotel accommodation and incidentals. The employee will be reimbursed through a T&E report and you need to review these files for VAT expenditures.
* If you have affiliate companies/organizations located in the country where an event was held, the affiliate may have assisted with the meeting. If the affiliate actually paid expenditures on your behalf and later rebilled you, check the intercompany transactions to find out if VAT was incurred.
* For U.S. businesses wishing to file for refund, the U.K. VAT authorities work on a fiscal-year basis. Invoices dated July 1st to June 30th must be submitted for refund by the following December 31st. All other countries work on a calendar year and the submission deadline is June 30th.
* Switzerland requires you to submit proof of payment for every invoice submitted, regardless of the value.
* Unlike other countries, France considers the tax point on an invoice to be the date of payment, not the date of issue.