Currencies are impacting your VAT recovery process and reporting. This article explains how VAT4U handles this topic in different areas of the application.
👉 What are the different currencies we are talking about?
As you may know, the VAT must be always reclaimed to the Tax Authorities in local currency (the currency of the country where you want to recover VAT). Example: VAT must be recovered in HUF in Hungary or in GBP in the UK).
However, things are not always easy and straightforward. In fact, we often face different currency issues during the treatment of a transaction.
- Accounting currency: it corresponds to the currency of your accounting systems. E.g. a UK based company uses to have its accounting in GBP.
- Local currency: this refers to the currency of the Country of Refund.
- Invoice currency: most of the time invoices are already in local currency. However, it sometimes happens that an invoice is issued in another currency (very often in EUR or USD). Note: most countries allow the invoice to be issued in foreign currency, however, the VAT should be written in local currency in the document. Some countries allow mentioning the FX rate instead of the VAT.
- Data currency: this refers to the currency used when injecting data into VAT4U. For example, your Travel Expense Management tool or your ERP system may extract data in your accounting currency instead of the local currency.
- Reporting currency: in order to ease the consolidation of data and reporting insights, VAT4U provides dashboards and reporting in EUR.
👉 How does VAT4U manage these currencies across the process?
The easiest to explain this is to go through multiple concrete examples.
| Scenario 1 | |
| Let's say you are a German established company and want to recover VAT in France. Your accounting currency is EUR and the local currency of France is also EUR. You are in possession of a Hotel invoice in EUR and is reported in EUR in your Travel Expense tool. | |
| Accounting currency | EUR |
| Local currency | EUR |
| Invoice currency | EUR |
| Data currency | EUR |
| Impact on VAT4U | |
| This is of course an easy one. The currency does not affect anything in the process since the currency is EUR in all areas. | |
| Scenario 2 | |
| Let's say you are a German established company and want to recover VAT in Poland. Your accounting currency is EUR and the local currency of Poland is PLN. You are in possession of a Hotel invoice in PLN and is reported in PLN in your Travel Expense tool. | |
| Accounting currency | EUR |
| Local currency | PLN |
| Invoice currency | PLN |
| Data currency | PLN |
| Impact on VAT4U | |
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This is as well quite simple. The currency FX rate will only be affecting the VAT4U reporting who is in EUR. In order to display the values from PLN to EUR, VAT4U uses an FX rate (provided by fixer.io). The system uses the date of entry of the invoice in VAT4U as a reference. When the VAT refund happens (payment from the Polish administration to you), it is possible to register in VAT4U the final FX rate. |
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| Scenario 3 | |
| Let's say you are a German established company and want to recover VAT in Poland. Your accounting currency is EUR and the local currency of Poland is PLN. You are in possession of a Hotel invoice in PLN and is reported in EUR in your Travel Expense tool. | |
| Accounting currency | EUR |
| Local currency | PLN |
| Invoice currency | PLN |
| Data currency | EUR |
| Impact on VAT4U | |
|
The VAT must be reported in PLN to the Tax Authorities. Having VAT available in PLN in the document is a good step. However, your data related to this invoice was reported in EUR by the employee and your TEM tool. VAT4U will allow you to import the data in EUR but the system will NOT allow you to include this invoice in your VAT claim until you inject the values in PLN from the VAT4U data entry area. Once you inject values in PLN, the currency FX rate will only be affecting the VAT4U reporting who is in EUR. In order to display the values from PLN to EUR, VAT4U uses an FX rate (provided by fixer.io). The system uses the date of entry of the invoice in VAT4U as a reference. When the VAT refund happens (payment from the Polish administration to you), it is possible to register in VAT4U the final FX rate. This final FX rate will be used for the reporting and for invoicing our service fee to you. |
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| Scenario 4 | |
| Let's say you are a UK established company and want to recover VAT in Poland. Your accounting currency is GBP and the local currency of Poland is PLN. You are in possession of a Hotel invoice in PLN and is reported in GBP in your Travel Expense tool. | |
| Accounting currency | GBP |
| Local currency | PLN |
| Invoice currency | PLN |
| Data currency | GBP |
| Impact on VAT4U | |
|
The VAT must be reported in PLN to the Tax Authorities. Having VAT available in PLN in the document is a good step. However, your data related to this invoice was reported in GBP by the employee and your TEM tool. VAT4U will allow you to import the data in GBP but the system will NOT allow you to include this invoice in your VAT claim until you inject the values in PLN from the VAT4U data entry area. The currency FX rate will only be affecting the VAT4U reporting who is in EUR. At this moment, VAT4U only allows reporting in EUR. In order to display the values from PLN to EUR, VAT4U uses an FX rate (provided by fixer.io). The system uses the date of entry of the invoice in VAT4U as a reference. When the VAT claim is created, the system takes the VAT claim date as a reference date for the FX rate. This final FX rate will be used for the reporting and for invoicing our fee to you. |
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Note: in all cases, for Technology Only (Basic) service the FX rate of the date of the claim is taken into account for the invoicing of our service fee to you because the billing of our service happens upon claim submission.