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VAT PULSE

A blog about local and foreign VAT matters, best practices, and tips from practioners.

Our client, an internationally well known and respected name in the paint industry, has been engaged in a highly profitable business by building a strong dealer network for many decades like many others in the industry. One of their many practices to incentivize their dealer network is running MICE programs which is essentially a luxury retreat for the highest performing dealers. Our client, on every single MICE program, organized spent more than INR 100,00,00,000 (€1,27,93,718), on which they paid taxes of approximately INR 5,00,00,000 – 10,00,00,000 (€6,39,685 – € 12,79,371) on foreign VAT on different travel-related activities such as travel, accommodation, food, etc. How much of that was actually reclaimed was the question that we probed into.

The Challenge
Lack of basic awareness

Estimating on a very superficial level the spend on their incentive program and the possible VAT paid while hosting it, we estimated that our client might have some kind of a framework in place that enables the filing of VAT claims to obtain a refund. It was rather surprising to us when we found out from our conversations that the client was entirely unaware of the fact that claims on VAT could even be made for refunds. Or that many organizations around the world have been leveraging VAT recovery agents as partners to improve their working capital management.

This lack of awareness resulted in our client not claiming any VAT refunds for the last years!

Problem Identified

With the fact that our client had absolutely no recovery framework in place, we conducted a VAT recovery audit to understand the precise expenditures that they may have incurred and explored the various possibilities of recovery.

Our calculations till date indicate that an approximate of  INR 100,00,00,000of foreign VAT had been left unclaimed over a period of 20 years.

Solution Proposed

With the problem clearly lying in awareness, we conducted our VAT recovery audit keeping in mind that we had to build the foundations of the entire process and ensure timely execution. In our research, we looked through the various expenses that they incurred on business activities and the geographies that these activities were held. Isolated the VAT regulations and guidelines established by the governing bodies of that area and created a complete portfolio of the opportunities available for reclaim which includes certain opportunities where VAT recovery can be maximized up to last five years!

Post the generation of this data, our experts presented our client with the total value that they could actually claim in VAT refunds and also how they had to go about the process.

Outcome

Targeted plan to ensure the refund of the INR 5,00,00,000 – 10,00,00,000 (€6,39,685 – € 12,79,371) on VAT claims every year!

Looking for ways to boost the health of your organization’s finance and cash flow? Then get a free assessment of your VAT refund eligibility and possible reclaim amount today by filling this form here!

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