1. What is VAT?
Value-added tax (VAT) is used most often in the European Union. It is a type of consumption tax that is placed on the added value of a product or a service whenever it is sold. Businesses recover VAT paid on their purchases (Input VAT) and pay VAT on their sales (Output VAT). The final consumer is not allowed to recover its Input VAT.
2. How is the VAT amount calculated?
The VAT amount is calculated on the basis of the net amount of the invoice to which a VAT rate is applied. The sum of the net amount and VAT amount is called the gross amount. This VAT rate varies depending on the legislation of each country and the typology of goods and services involved. Check our dynamic VAT map to find out the VAT rates in use in each country of the European Union.
3. Are business travel expenses subject to VAT?
Yes, travel expenses like restaurants or taxis are products & services subjected to VAT. Therefore, you are paying VAT whenever you travel just like in day-to-day spending. However, in exceptional cases, some countries consider that some of those expenses are excluded from the scope of application of VAT and a 0% VAT rate is applied. Likewise, supplier invoices are also subjected to VAT and can also be collated to VAT reclaim.
4. How do I know how much VAT I can recover?
As a general rule, as a company you are allowed to claim your VAT back on all your expenses. However, some categories of products are excluded or partially excluded from this right of deduction. Each country has specific legislations and rules in place, sometimes making it difficult to know if you are allowed to claim your VAT back or not. This is one reason to start using VAT4U as we have mapped all the country specifics to make this work easier for you.
5.1. I am established in an EU Member State, can I reclaim VAT paid in another?
Yes - In this case, three scenarios are possible...
- Scenario 1: You are VAT registered in this country. In this case you have to inject the expenses and the related input VAT into your local VAT returns.
- Scenario 2: This country is a European Member state but you are not registered there. In this case, as a foreign company, you will have to submit a VAT claim through the European VAT refund procedure. Start preparing and sending this claim here.
- Scenario 3: It is a third country (non EU) and you are not registered there. In this case, if the country has a reciprocity policy in place with your country, you are allowed to claim your VAT back under a specific procedure.
5.2. I am established outside of the EU, can I carry out VAT reclaim?
Yes. VAT reclaim through VAT4U is also available for non EU businesses (e.g. companies based in USA, Canada, India, Japan, Israel etc). Our system will assess your VAT refund rights on each of your expenses according to the rules of each country of refund and the reciprocity treaties in place between your country and the country of refund.