In today’s interconnected business world, international travel remains essential for companies expanding their global presence. Consequently, there are expenses companies need to take on, and there are expenses that can be recovered. Many Colombian companies, don’t seem to realise they can recover Value Added Tax (VAT) paid during international business travel. Let’s take a deep dive and break it down to study what it is, and how VAT refunds work for Business Travel.
What is VAT and Why Should You Care?
Value Added Tax, commonly known as VAT, is a consumption tax that appears with various names across different countries of the world. It is part of the fiscal policy of many countries that has to be paid. There is no way around the payment. For business travellers, however, there is a unique process to refund the VAT paid on several items, including hotel expenditures. Do you want to recover your VAT on business travel? Read on.
What Business Expenses Qualify for VAT Refund?
When company employees travel abroad, VAT is charged on many of their expenses. The most commonly recoverable costs include:
- Hotel accommodation — hotel stays typically offer the biggest refund opportunity
- Conference and training fees
- Local transportation (including taxis and rental cars)
- Business meals (in certain countries)
- Equipment rental
- Business services
For example, a week-long business trip to Austria may include VAT on hotels (20%), conference fees (20%), and transportation (20%). Recovering these taxes reduces Business Travel costs.
Examples of VAT in Some Countries
Starting with the United Kingdom
The UK makes an excellent first step into VAT recovery for Colombian companies. Their system is straightforward, with no special requirements for Colombian businesses. Most business expenses in the UK carry a standard 20% VAT rate, and their VAT refund process is not difficult.
Navigating The European Union
The European Union offers even more opportunities, though the rules get more complex. Take the Netherlands, for instance. They charge 21% VAT on most services but reduce it to 9% for hotel stays.
Austria is one of the most straightforward countries to deal with. They have their list of requirements and documents to be submitted. Once you have them in order, it is just a matter of time before the Country refunds. Here is more comprehensive information on VAT refunds.
The Rule of Reciprocity
Several EU countries implement the rule of reciprocity. In other words, if a claiming country refunds to the country the claim is being made to, then the country will refund to the claiming country. For example, Germany will not refund to Colombia on Business Travel because Colombia does not refund to Germany.
There Are Exceptions
Spain presents a unique case. The Country typically follows reciprocity rules but makes a notable exception for exhibitions and trade shows. This creates a specific opportunity for Colombian businesses who participate in Spanish trade fairs and exhibitions.
Some European countries mandate the appointment of a local fiscal representative to process VAT refunds. Switzerland and Italy are typical examples. This additional requirement means VAT recovery in these cases only makes economic sense when dealing with significant expense amounts that can justify the extra complexity, cost and time.
Making Claims Simple
Success in VAT recovery comes down to good record-keeping. Your travelling employees need to bring back clear invoices showing the VAT amount, supplier details, and your company information (name and address). Most countries insist on original invoices to process a refund. It is, therefore, as simple as retaining the original invoice. The entire refund process will revolve around the VAT Invoice.
Getting started with VAT recovery doesn’t need to be complicated. Begin by looking at where your team travels most often. A quick review of last year’s travel expenses can reveal your biggest opportunities for refunds. Most companies find their team visits certain countries repeatedly – these should be your first focus.
Using a VAT Recovery Company to Work For You
Most corporates these days, find it worthwhile to work with a VAT recovery company. These experts know the ins and outs of each country’s system. They spot opportunities you might miss and handle all the paperwork. Think of them as your local guide in each country – they know the shortcuts and speak the language. They typically only charge a percentage of what they recover, so you only pay when you get your money back.
Most VAT recovery companies will assist with the estimation of VAT refunds. Here at Coromandel SAS, we have a VAT Refund Calculator on our website. It will help you with a quick and easy assessment of what you can expect to receive as a refund.
Your VAT recovery partner handles the claims while your team can focus on business. Most companies see their first refunds within 6 to 9 months of starting the programme. Thereafter, there is a regular and steady inflow of refunds, provided your company keeps the pipeline flowing.
Getting Your Documents Right
The secret to successful VAT recovery lies in proper documentation. Every VAT invoice needs specific details to be eligible for the VAT refund process. The invoice needs to be compliant. Think of each invoice as a key – it needs all its notches to unlock your refund. Your invoice must show the supplier’s full business details and VAT number. The invoice needs to contain your company’s name and address too. The VAT amount should be clearly stated separate from the other charges and details. Should there be different levels of VAT involved in the invoice, they should be shown separately.
Planning for Better Returns
Smart planning can increase your refund potential. When booking hotels in places like the UK or Netherlands, check that they’re VAT-registered businesses. The same goes for conference venues and training providers. A little research upfront can mean bigger refunds later.
If you conduct conferences abroad, you could select a country where the VAT refund processes are easy to handle. That will make sure you recover all the VAT paid which could be as high as 25%.
Train your travelling employees about what to look for. They need to know when to ask for a proper VAT invoice instead of a simple receipt or a proforma invoice. Most importantly, they should know which expenses typically qualify for refunds in their destination countries.
Time to Start Recovering
For Colombian businesses, VAT recovery represents a significant opportunity to reduce travel costs. While the process might seem complex at first, the right partner makes it straightforward. Remember, every successful VAT recovery starts with a single step – reviewing your current situation and reaching out to potential recovery partners.
The sooner you begin, the sooner you can start getting back money that would otherwise be lost. With international business travel costs rising, VAT recovery offers a practical way to manage expenses better while maintaining your global business presence.
Common Challenges and Solutions
Even successful companies face initial hurdles. Sometimes language barriers can make requesting proper VAT invoices challenging. Smart companies have been known to give their travelling employees a simple note in local languages to request VAT invoices.
Missing deadlines is another common issue. Most countries have strict time limits for VAT claims. These are etched in stone and not moveable! A good recovery partner tracks these deadlines for you, ensuring you never miss refund opportunities.
The Bottom Line
Colombian companies are leaving money on the table by not claiming VAT refunds. One Finance Director put it simply: “It’s like getting a discount on all our international travel, but we have to ask for it.”
With business travel costs rising, VAT recovery offers a practical way to manage expenses better. The process gets easier with time, and the rewards are worth the initial effort. Most importantly, it’s money your company has already spent – you just need to claim it back.
Remember: every unclaimed VAT refund is a missed opportunity to improve your company’s bottom line. With proper planning and documentation, you can transform these missed opportunities into real savings.
Would you like specific details about getting started with a VAT recovery programme or information about particular countries your company visits most often? Contact Coromandel SAS now.
Additional Information and Links
- VAT Refunds for Business Travel – Coromandel SAS website
- VAT Refunds for Businesses in the USA – Blog post – Mano Chandra Dhas
- VAT Refund – Blog post – Mano Chandra Dhas
Some Frequently Asked Questions (FAQs):
Who is eligible for VAT refunds on business travel expenses, the traveller or the company?
VAT refunds on Business Travel are only available to companies whose employees travel to VAT-refunding countries on company-related business. The refund is always issued to the company, not to individual employees
Can company owners claim VAT refunds for their own travel expenses?
Yes, if the traveller is also the owner of the company, the VAT will be refunded to the company they own. Again, refunds are strictly issued to the company and not to individuals.
Are there deadlines for filing VAT refund claims in different countries?
Yes, every VAT-refunding country has specific deadlines for filing refund claims, often based on their fiscal year and VAT laws. Missing these deadlines can result in losing eligibility for the refund.
What documentation is required to submit a VAT refund claim?
Proper documentation, including original invoices, receipts, and proof of business-related travel, is essential for submitting a VAT refund claim. Other documents are required depending on the country. It is best to consult a VAT specialist for guidance.
How can I check if my invoices are eligible for VAT refunds?
The country visited must refund VAT. In most cases, invoices are eligible for a refund on the VAT component. However, to check compliance, we need to review your invoices. Contact Coromandel SAS for assistance in verifying your documents.
In which currency are VAT refunds paid, and how are they processed?
VAT refunds are typically issued in the currency of the original payment. Refunds are transferred to the bank account of the VAT recovery company managing the claim. The company will then convert the amount to your preferred currency based on the applicable bank rate for the transaction.
Is the VAT refund process complicated? Should I use a specialist service?
The process is not inherently difficult but involves many rules, regulations, and strict deadlines. Engaging a specialist VAT recovery company can streamline the process and reduce the risk of rejection due to filing errors or incomplete submissions.
How long does it take to process a VAT refund?
Most VAT refunds are processed between 6 to 9 months after submission. However, processing times can vary depending on the VAT authorities, their queries and clarifications needed.
Why do VAT refund processing times vary across different countries?
Processing times depend on the efficiency and processes of each country’s VAT authority. Some countries may have faster systems, while others may experience delays due to higher volumes of claims or internal administrative procedures.
© Mano Chandra Dhas
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