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European VAT Recovery - An Overview

European VAT Recovery (2)
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European VAT Recovery (2)

Companies doing business in EU countries where they are not established often incur foreign VAT on invoices. The foreign VAT charged on these expenses cannot be recovered through their own domestic returns.

However since 1 January 2010 there have been opportunities to recover VAT suffered on expenditure incurred by a trader in other EU countries.

Each country implements its own rules on what can be reclaimed from abroad. The following inexhaustive lists the expenses on which VAT may typically be claimed:

  • Employee travel and lodgings, including hotel and accommodation, restaurant meals, diesel / petrol, road tolls and car rental;
  • Telephone;
  • Exhibition, event and conference costs;
  • Marketing and promotional costs;
  • Equipment and tooling purchases;
  • Certain professional fees. 

Related: VAT on Cross-Border Transactions Within the EU

How Can VAT Be Recovered?

The system for traders to recover their foreign VAT requires the trader to submit a refund claim via the website of the tax authority of the country in which the claimant is established.

However, where a trader should be registered for VAT in that other state then their VAT recovery must be through its own registration in that state.

Making Claims 

Each EU member state has set the minimum amount that may be recovered under each VAT refund application.  The minimum for annual applications is (generally) €50 and €400 for interim applications (see below).  Items not included in earlier interim applications can be included in applications filed in the same year.

Minimum amounts for refund

         
               

Country

Annual

Interim

 

Country

Annual

Interim

 

 

 

 

 

 

 

 

 

Austria

EUR 50

EUR 400

 

Lithuania

EUR 50

EUR 400

 

Belgium

EUR 50

EUR 400

 

Luxembourg

EUR 50

EUR 400

 

Bulgaria

BGN 100

BGN 800

 

Malta

EUR 50

EUR 400

 

Croatia

HRK 400

HRK 3,100

 

Netherlands

EUR 50

EUR 400

 

Cyprus

EUR 50

EUR 400

 

Poland

EUR 50

EUR 400

 

Czech republic

EUR 50

EUR 400

 

Portugal

EUR 50

EUR 400

 

Denmark

DKK 400

DKK 3,000

 

Romania

EUR 50

EUR 400

 

Estonia

EUR 50

EUR 400

 

Slovakia

EUR 50

EUR 400

 

Finland

EUR 50

EUR 400

 

Slovenia

EUR 50

EUR 400

 

France

EUR 50

EUR 400

 

Spain

EUR 50

EUR 400

 

Germany

EUR 50

EUR 400

 

Sweden

SEK 500

SEL4,000

 

Greece

EUR 50

EUR 400

 

UK

GBP 35

GBP 295

 

Hungary

EUR 50

EUR 400

 

Iceland

ISK 11,800

ISK 60,800

 

Ireland

EUR 50

EUR 400

 

Norway

NOK 200

NOK 2,000

 

Italy

EUR 50

EUR 400

 

Switzerland

CHF 500

CHF 500

 

Latvia

EUR 50

EUR 400

 

 

 

 

 

Data – European Commission, Taxation and Customs Union

Time Limits

The application period is the calendar year and the time limit for the claim to be submitted is 30 September in the following calendar year.

Related: UK VAT Deduction Rules - Key Change Announced

Filing

Generally, applications are filed online through a digital portal and some member states require various supporting documentation to be attached but these may be requested at a later stage by the processing authority.

Once the tax authorities decide to issue the refund, it must be paid within ten days after the expiration of the submission deadline.

Although long established, this recovery process can prove to be a complex and confusing procedure due to the fact that:

  • Claims are often only successful if they are basic and require limited review time by the foreign authorities;
  • If there is a query or hold-up on the claim, many VAT authorities can be very reluctant to deal with the home state tax authorities of the claimant.
  • Also, the rules in different countries are not uniform for reclaims, and change frequently.

Related: Why Your Statutory Obligations Matter [UK Companies]

Non-European Companies

Where non-European registered companies are concerned, to enable recovery claims to be made, it is a requirement that the non-EU company’s home state has a reciprocal VAT agreement.

Some countries require a Fiscal Representative to be in place before granting non-European companies refunds. In addition, claims must be submitted on a country-by-country basis, often requiring local language and procedural understanding.

Disclaimer: This blog reflects a ‘snapshot’ overview of the EU VAT recovery regime only. The blog is intended to bring this development to the reader’s attention and to alert to the publication of the HMRC guidance in this area. As with all technical taxation and VAT matters, specialist advice should be sought in relation to the interpretation and application of these rules.

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