VAT Refunds From Abroad
Nowadays, cross-border transactions have become something usual and international commerce is one of the main focuses of business of all size. When talking about international commerce, cross-border transactions, exports, imports, etc, you talk about VAT. VAT can be charged in more than one way (i.e. actual payment, reverse charge, not charged, etc.) and the quote applied differs from transaction to transaction and from country to country.
VAT has been thought in a way that it is the only tax that can be offset with any other tax or can be claimed back. If you are in the international business and your main focuses is cross-border transactions and you get to pay the VAT in the country you actually buy the goods or services, you are legitimacy entitled to claim back the VAT paid.
If before 01.01.2010, every country had their domestic legislation reckon the VAT reimbursement procedure, after the date mentioned earlier, the EU Commission has introduced the 9th Directive standardizing the VAT claim back procedure by creating a platform for all EU Member States.
If by all means, you have paid the VAT in other country than your own you can go online and submit a VAT reimbursement return and within 9 months top, you should have the money back.
Methodology and timing
By introducing the 9th Directive, the process of VAT reimbursement has been simplified. If before implementation of the Directive, the process was fairly paper intensive and time consuming now, by online application using codes for all products and services, the process has become far easier and approachable.
There are 4 major criteria to take into consideration when submitting a VAT claim back return:- quick assessment on whether the VAT was due;
- VAT code of the supplier;
- amount of the VAT claimed;
- proof that the VAT has actually been paid.
The VAT claim return has to be backed up by explanatory documents like:
- (i) the original invoice;
- (ii) the contract;
- (iii) the proof of payment of VAT (i.e. payment of invoice to the supplier including the VAT);
- (iv) proof of the VAT registration in the home country.
The VAT claim return is submitted online on the website portal of the Tax Authority in the home country of the taxpayer. The return is then transmitted to the tax authority in the country of VAT claim, tax authority that will analyze the file and reimburse the VAT.
The legal timing for submitting the return is 30th of September of the current year for the previous one in which the goods or services have been acquired. The timing for analyzing the file and reimburse the VAT is 6 months from submitting the VAT claim return. The timing can be prolonged up to 9 months if the Tax Authority requests additional documents and information.
The minimum amount that can be requested is 200 EUR in case of imports and 50 EUR in case of common goods or services supply.
In this particular case of VAT reimbursement from abroad, the help of a professional adviser is always needed. There are two reasons to turn to a consultant:
- guarantee that the VAT claim return is submitted accordingly and professionally;
- liaising with the Tax Authorities with proper answers to their punctual questions.
Before submitting the VAT claim return the tax consultant can make a quick assessment on the transaction and advise if the VAT has been properly charged and thus move forward with the VAT claim return submission.
In this particular period, of world economic crisis, taxpayers tend to look carefully on cash and VAT refund has become more and more requested. Even if the timing does not match the expectations, the reimbursement of a tax will always be the chose of a taxpayer.
Assessment and eligibility criteria
Each VAT paid in other EU Member State can be reimbursed conditioned that:
- has been correctly paid according to the EU Directive’s provisions corroborated with the domestic legislation of each Member State;
- the taxpayer requesting the VAT paid is VAT registered in its home country.
The new rules of VAT sourcing, B2B and B2C have eased the VAT assessment and VAT payment.
| B2B |  |
reverse charge |
| B2B | |
VAT effective payment |
The VAT claim return can be consisting but not limited to: (i) gas invoices; (ii) imports with effective payment in custom; (ii) all types of services; (iii) all types of goods; (iv) vehicle lease; (v) road taxes; (vi) accommodation; (vii) taxis; (viii) restaurant and catering, etc.
The VAT registration in the home country is compulsory, as the VAT can be claimed only by a VAT registered taxpayer.
Study case
The CEO of a multinational based in Romania is delegated to Spain for a one week conference. He has corporate accommodation, travel and food expenses. The individual pays all this, including the VAT for each type of service.
Upon his return, the CEO will give all the original invoices to their tax adviser to further proceed with the VAT claim. The tax adviser will go online and submit a VAT claim request for all the VAT paid, based on the explanatory documents provided by the CEO. The company will receive the money back within 6 months from submitting the VAT claim back.
Conclusions
With the revamp of cross-border transactions, Tax Authorities face more and more involvement from the taxpayer’s side in VAT claim return submissions. The reason for taking this approach, in my opinion is that the VAT is the tax paid on consumption and the only one that can be easily claimed.
With an online request submission you get to be reimbursed the money paid as VAT in any other EU Member State. And that matters in most cases.
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