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VAT PULSE

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

Our client an industrial manufacturer involved in engineering and manufacturing of different industrial systems has played a pivotal role in enabling the industrial revolution in the country. Building on their engineering capabilities and legacy, they have entered the global market engaging in trade, sales operations and various activities that have aided in their steady growth; and their business travel and activities have grown proportionally to enable it.

The Challenge

Lack of Awareness

As is the case with most organizations, big and small, that conduct business across the border, our client had neither the idea of how VAT reclaim is to be done, nor the value of refund that he could expect considering the large size of their operations.The challenge, however, is not only with our client but also with the industry and audience in general which has resulted in approx. 20 billion euros left unclaimed each year!

The challenges begin with the lack of ‘VAT/Tax control framework’ which is meant for preventing tax errors, identify opportunities in a timely manner and perform correct filings at the right moment in the complicated businesses structure. This challenge then continues due to a lack of expertise in the intricacies of the foreign VAT rules and regulations when it comes to making the final filing application that leads to potential VAT refund losses. With a large sum of our client’s business taking place in UK where the highest refund on VAT is provisioned for companies conducting business there, the potential of reclaim was phenomenal but not realized by the client or their VAT recovery vendor.

Problem Identified

Understanding the intricacies of their business, our experts dived into a recovery audit procedure that involved the study of their business activities, travel locations, methods, expenses associated, VAT paid documentation and more. This study leads to the isolation of two situations that running parallel was hampering the reclaimed amount being received.

  • Partial recoveries: Our investigations lead us to a discovery that clearly indicated all avenues of claim were not being leveraged on due to the lack of expertise of the current VAT recovery vendor. This resulted in a partial recoveries.
  • Inaccurate taxation: The VAT that was being paid on the consulting services obtained and other business activities conducted was inaccurately charged impacting the overall recovery amount.

Solution Proposed

With the problems identified, our VAT experts immediate recommendations were a culmination of all the discoveries that deliver clear instance based insights into the causes of partial recovery of VAT with the real value that can be claimed with directives on how it can be done. This report consisted of the following analysis;

  1. A breakdown of all the different types of business travel that the client was engaging in and the expenses related to them like the hotel and stay, meals and client meets, travel at the location, conferences, and more.
  2. The percentage of the VAT that was being charged for each expense and the total value of VAT that was being paid on an annual basis.
  3. What was the current percentage of the VAT paid that was being recovered.
  4. The scope of improvement and other areas of recovery that had not been leveraged till now.
  5. The next steps to ensure maximum recovery.

However, on account of the organizational hierarchy and delay in response, the client was unable to meet the VAT claim filing deadline which resulted in a loss of INR 60,00,000 (€76,000).  

INR 60,00,000 (€76,000) that could have been spent on sales operations, administration, infrastructure, or more left behind. Do you know if your company is losing money in unclaimed VAT refunds too? Get your free VAT recovery assessment with us right now!

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