by Selma Canas | November 6, 2023
International travelers can obtain refunds of some taxes they paid on goods and services in foreign countries, known as Value-Added Tax, or VAT. This is a consumption tax added to the price of goods and services paid by the final consumer. VAT rates vary by country and the process of claiming refunds can be complex and time-consuming. Not all purchases are eligible for a VAT refund either but considering that $7-9 billion is left unclaimed every year by businesses in the United States and Canada, it may be worthwhile to put in the effort.
Value Added Tax Rates and Claimable Expenses
VAT rates and claimable expenses vary by country, but one can get back anywhere from 7% to 27% of the VAT paid depending on the country and type of goods and services. Claimable expenses may include:
- costs associated with business travel, i.e., hotel accommodations, meals, transportation.
- conferences, trade shows, seminars
- professional fees, marketing, and office expenses
- purchase of goods and services
As an example: In Germany, the claimable VAT rate for accommodations is 7%, restaurants and conferences are 19%, and fuel is 0%. Whereas in France, accommodations and restaurants are 10%, and conferences and fuel are 20%.
Value Added Tax Laws
VAT laws differ by country, as does the refund process. Most countries require fiscal representatives who speak the language. The US has reciprocity with most European countries and therefore can reclaim VAT from those countries. There are also statutes of limitations for reclaiming tax, generally one year but sometimes longer. International VAT refunds are available to travelers who are not residents or citizens of the country where they made purchases, however, some countries only offer refunds to tourists, while others allow business travelers to claim them. There are companies that specialize in reclaiming VAT taxes and with so many differences between countries, it is advisable to seek their advice.
What to Research Before Your Next Trip
Before your next international trip, research VAT refund rules and rates for the countries you will be visiting and compare them. Choose the stores that offer the best deals and easiest refund options to purchase goods or services. Some stores advertise “tax free shopping or VAT refund”. Make sure you obtain tax-free forms and/or invoices from each store and purchase. You will need these to claim your refund. Submission deadlines also vary by country. The deadline to submit a claim for both Germany and France is June 30 and can take up to 10 months for non-EU companies to receive their refund. For Canada, the Canada Revenue Agency must issue a decision within four months of receiving the refund application, but there is no submission deadline for the company.
As in most international transactions and travel, research and planning ahead is a must. By putting in the time and effort to do your research, you can benefit greatly from VAT Reclaim. If you attend overseas trade shows, VAT refunds can potentially pay for your next trade show, thereby, increasing your international trade activities. VAT refunds help reduce costs, improve cash flow, and increase the ROI of international business travel.