Currencies play a significant role in the VAT recovery process and reporting. This article outlines how VAT4U addresses currency exchange rates across various areas of the application.

Understanding Currency Types

Accounting Currency: This is the currency used in your accounting systems. For example, a UK-based company typically uses GBP for its accounting.

Local Currency: This refers to the currency of the country where VAT is being reclaimed. For instance, in Hungary, the local currency is HUF, and in the UK, it's GBP.

Invoice Currency: Most invoices are issued in the local currency. However, some may be issued in another currency, often EUR or USD. While most countries allow invoices in foreign currencies, VAT must usually be stated in the local currency. Some countries permit the inclusion of the FX rate instead of the VAT amount.

Data Currency: This refers to the currency used when entering data into VAT4U. For example, your Travel Expense Management (TEM) tool or ERP system may extract data in your accounting currency rather than the local currency.

Reporting Currency: To simplify data consolidation and reporting, VAT4U provides dashboards and reports in EUR.

How VAT4U Handles Different Currencies

To illustrate how VAT4U manages these currencies, let’s explore several scenarios.

Scenario 1: You are a German company recovering VAT in Poland.

• Accounting Currency: EUR
• Local Currency: PLN
• Invoice Currency: PLN
• Data Currency: PLN

Here, the VAT must be reported in PLN to the polish Tax Authorities. Since both the invoice and data are already in PLN, VAT4U will allow you to include this invoice in your VAT claim. The FX rate, provided by fixer.io, will only affect VAT4U reporting in EUR. The system uses the invoice entry date for reference, and upon receiving the VAT refund, you can register the final FX rate in VAT4U, which will be used for reporting and service fee invoicing.

Scenario 2: You are a German company recovering VAT in Poland.

• Accounting Currency: EUR
• Local Currency: PLN
• Invoice Currency: PLN
• Data Currency: EUR

In this case, while the invoice is in PLN, your data is reported in EUR. VAT4U will allow the import of the data in EUR, but you cannot include this invoice in your VAT claim until you enter the corresponding values in PLN through the VAT4U data entry area. Again, the FX rate affects reporting in EUR, using the invoice entry date for reference. When the VAT refund occurs, you can record the final FX rate in VAT4U.

Scenario 3: You are a UK company recovering VAT in Poland.

• Accounting Currency: GBP
• Local Currency: PLN
• Invoice Currency: PLN
• Data Currency: GBP

The VAT must be reported in PLN. Since your data is in GBP, VAT4U will allow you to import this data but will not permit the inclusion of the invoice in your VAT claim until you enter the values in PLN. The FX rate will affect VAT4U's reporting in EUR, using the invoice entry date as a reference. When the VAT claim is created, the system uses the claim date for the FX rate. Upon receiving the VAT refund, the final FX rate can be registered in VAT4U for reporting and service fee invoicing.