Key takeaways
- Know your eligibility: Businesses not VAT-registered in an EU country can often reclaim VAT paid there, provided they meet local refund criteria.
- Stay organized: Keep detailed invoices and submit claims before each country’s deadline—usually within 6–9 months after year-end.
- Seek expert help: VAT refund rules differ across EU countries, so consulting a tax professional can simplify compliance and boost refund success.
The European Union (EU) has a myriad of rules and regulations regarding Value Added Tax (VAT) for businesses, which can be difficult to wrap your head around. Not least when it comes to reclaiming VAT paid in EU member states. However, with the right knowledge and strategy, companies can effectively manage their VAT claims, potentially saving significant amounts of money. In this article we provide a comprehensive guide to EU VAT refunds for businesses, outlining the essential steps and tips for a successful VAT recovery process.
Understanding VAT in the EU
The EU has a harmonized VAT system, meaning that while the VAT rules are established by the EU, each member state can set its own VAT rates, within set parameters. This variance in rates across countries can make VAT refunds for businesses both an opportunity and a challenge.
Eligibility for VAT refunds
To be eligible for a VAT refund in the EU, a business must not be VAT-registered in the country where the refund is being claimed and must not have conducted any taxable operations in that country. Generally, only businesses established outside of the refunding country can claim a VAT refund there. However, specifics can vary, so it’s important to check the local VAT refund rules of the country in question.
Types of expenses eligible for a VAT refund
The types of business expenses eligible for VAT refunds can include, but are not limited to:
- Travel and accommodation expenses
- Trade fairs and exhibitions expenses
- Professional services fees
- Goods and services used for business purposes
Each country has its own list of eligible and non-eligible expenses for VAT refunds, so reviewing the specific requirements of each country where you've incurred VAT is crucial.
How to claim a VAT refund
For EU-based businesses
Companies engaging in activities within an EU member state, where they do not regularly sell goods or provide services (and therefore not required to register for VAT in that country), have the right to recover VAT expenses as per the VAT Directive (Articles 170-171a). This reimbursement process involves receiving a refund of the VAT from the member state where the VAT was paid.
To simplify the process and avoid issues arising from language barriers, businesses should submit an electronic refund request to their local tax authorities. These authorities are responsible for verifying the applicant's identity, their VAT identification number, and the legitimacy of the refund claim before forwarding it to the tax authorities of the member state where the VAT was incurred.
The application must include all relevant VAT invoices and documentation to support the claim. Should there be a delay in the refund by the tax authorities of the country where the VAT was charged, the applicant is entitled to receive interest on the delayed payment.
For non-EU businesses
Companies located outside the European Union that incur VAT due to their operations in an EU member state, where they do not regularly provide goods or services (and therefore do not need to be VAT registered), can claim this VAT back. This reimbursement is processed through a refund from the member state in which the VAT was charged.
Applicants are required to submit a refund request to the tax authorities of the member state where the VAT was incurred. The application process can vary significantly from country to country, with different forms, documentation requirements, and deadlines. It is advisable to consult the local tax authority's website or seek advice from a tax professional.
Tips for a successful VAT refund
- Keep detailed records: Maintain all invoices and receipts related to your VAT payments. These documents are essential for your VAT refund application.
- Be aware of deadlines: Each country has its own deadline for VAT refund applications, usually within six to nine months from the end of the calendar year in which the VAT was paid.
- Understand local requirements: Familiarize yourself with the specific requirements for VAT refunds in each country where you've paid VAT. This includes eligible expenses, minimum claim amounts, and the documentation required.
- Consider professional assistance: Given the complexity of VAT laws and the variance between countries, consulting with a VAT specialist or tax advisor can be highly beneficial. They can help navigate the rules, prepare documentation, and increase the likelihood of a successful refund.
Conclusion
Claiming VAT refunds in the EU can represent a significant financial opportunity for businesses. While the process may seem complex and time-consuming, understanding the basics of eligibility, the types of expenses that qualify for refunds, and the application process itself can demystify VAT refunds. By keeping accurate records, being aware of deadlines, and possibly seeking professional advice, businesses can effectively reclaim VAT, improving their bottom line.
Do you need help with your VAT compliance and refunds? Book a free call with one of our VAT experts to find bespoke solutions for your business, optimize your VAT costs, and reach millions of new potential customers.
Frequently asked questions
Who can claim a VAT refund in the EU?
Businesses that are not VAT-registered and do not conduct taxable activities in the country where VAT was paid can usually claim a refund, provided they meet local eligibility rules.
What expenses qualify for VAT refunds?
Common eligible expenses include travel, accommodation, trade fairs, professional services, and business-related goods. However, each EU country sets its own rules on what qualifies.
How do EU-based businesses apply for VAT refunds?
EU companies must submit an electronic refund request via their home country’s tax authority, which then forwards it to the relevant EU member state where the VAT was incurred.
Can non-EU businesses also reclaim VAT?
Yes. Non-EU businesses can apply directly to the tax authority of the EU country where the VAT was charged, but the process and documentation requirements vary by country.
What are the deadlines for VAT refund applications?
Most EU countries require refund claims to be submitted within 6–9 months after the end of the calendar year in which the VAT was paid. Always check the specific national deadline.
