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File for a Refund,
But Make Sure
to Meet the Deadline |
If your firm does a lot of international business or travel, you might be overlooking a hidden treasure. When you spend money overseas, a Value Added Tax (VAT) may be imposed that averages 19 percent, but can reach 25 percent in some countries.
In some cases, you can also pay a VAT on products that your company imports for resale. VAT is a general consumption tax based on the price of goods and services. It is imposed on products at each stage of production and the amount is proportionate to the value added at that stage. In the end, the final price is the sum of the values added.
Every consumer - domestic and foreign - pays the consumption tax. And foreign consumers are entitled to refunds. Getting the money back can be complicated, however, so here are three hints to help:
 Collect your paperwork. Claiming a refund requires proper documentation and an application form, often in a foreign language. Each country has its own laws and requirements, so be sure your employees keep all receipts and get the proper forms when they make their purchases.
Watch the calendar. Filing deadlines vary. In Germany, for example, all refund applications must be filed on or before June 30 each year. The deadlines won't generally be extended, so even if you're lacking some documents, file on time. Missing paperwork can often be provided later.
Be patient. Once you've filed your paperwork, refunds can take from six months to two years to receive.
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How It Works
Getting a refund may be time-consuming, but it can involve more than petty cash. Lets say two of your sales reps spend three weeks in Germany, and they each submit expenses for $15,000, including services, gifts and other outlays. You could recover $4,800 of those expenses: the total of the 16 percent VAT they paid. ($15,000 times 2 employees equals $30,000 times 16 percent equals $4,800) |
U.S. firms pay $1 billion in VAT each year yet claim only 20 percent of that in allowable refunds. Consult your tax adviser to help you reclaim your piece of this hidden treasure.
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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