The OECD estimates that around 50% of businesses fail to reclaim any foreign VAT or leave significant portions (up to 73% in certain cases) unclaimed. It represents an actual cost to a business and the mechanisms in place to recover this VAT are not as tortuous as they once were.

So why do businesses miss claiming this VAT?

It could be down to a simple lack of awareness: Many small-to-medium enterprises (SMEs) do not realise they are legally entitled to recover VAT incurred on such items as: business travel, accommodation, or conferences in overseas countries.

In addition, there is perceived administrative complexity: This VAT cannot be claimed on a businesses’ domestic VAT return. Different countries enforce separate refund procedures (such as the EU’s 13th Directive or UK Notice 723A).

There are also strict non-negotiable deadlines and thresholds: Most countries impose rigid filing cutoffs (eg; December 31 for UK and many EU-related claims) and minimum claim amounts.

There are significant ineligible expenses. Common rejections occur because businesses attempt to claim blocked expenses like client entertainment, non-business car hire, or VAT attributable to exempt supplies.

Perhaps the biggest reason for not claiming is that ‘it’s not worth it!’

Tips

• record all VAT incurred
• determine if the value threshold is met (each country has a set minimum claim, but it is mainly around the €50 pa figure).
• ensure valid invoices are obtained and retained
• obtain a certificate of status
• monitor timing
• check the relevant deadline for the country and submit a claim in time (deadlines are not standard and vary country to country. However, they are mainly 30 June or 30 September, and the claims are on a calendar year basis)

It is possible to arrange for an agent to make a claim on a business’ behalf. 

More on GB businesses claiming overseas VAT here and on overseas businesses claiming in GB here.