Countries across the globe apply value-added tax to many of the services business travelers use most: meals, hotels, car rentals and more. In fact, VAT accounts for roughly 5% of total foreign travel spend. Businesses usually are entitled to recover a significant portion of VAT. Yet all too often they don’t, because reclaim can be dauntingly complex. But companies can take steps to simplify the process and get back the money they’ve been leaving on the table.
1. Educate travelers
Explain to travelers that invoices must list the hotel’s VAT number and your company’s correct name and address (not the traveler’s name and address). The invoice also needs to itemize clearly how much VAT is applied to individual items—for example, a room may carry a different VAT rate than food and beverages.
2. Steer clear of daily allowances
Travelers with daily allowances to spend as they please have less incentive to collect VAT-compliant invoices.
3. Engage preferred suppliers
Involve suppliers in your VAT-recovery initiative to simplify and expand your reclaim opportunities.
4. Use an automated expense management system
You’ll gain greater visibility into ways you can recover VAT, and some expense management systems even can generate VAT reclaim reports.
5. Automate your VAT recovery
Maximize efficiency and savings by automating the recovery process. For example, BCD Travel uses Taxeo to provide customers with in-depth VAT reclaim expertise and a paperless system that connects to hotels, car rental companies and other suppliers their travelers use. The automated system removes manual labor from VAT reclaim, simplifying the process. The result is greater VAT recovery than even large multinational businesses can accomplish on their own.
6. Outsource foreign VAT recovery
Where automation isn’t yet possible, hire a reclaim specialty firm. You’ll pay them with a portion of your recovered VAT, but their expertise and economies of scale will still save you more money than processing claims on your own.