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VAT PULSE

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

Our client, a European giant with a development center in India, has been engaged in consistent long-term recurring business activities that include conferences, business meetings, customer meetings, training sessions and more. Every year resulting in an incurred expenditure running up to INR 400,00,000 (€5,11,748). While they believed that they were reclaiming the maximum VAT possible, we discovered that this wasn’t the case.

The Challenge

Lack of knowledge of local rules and regulations

Unlike many of the organizations spanning various industries around the globe today, our client was neither unaware nor unsure of what to do when it came to managing their VAT recoveries. They were well aware that VAT reclaim is very much possible if done appropriately and on time. Understanding their limitations in regulations expertise and the lack of resources to manage this, they partnered with a VAT recovery vendor to manage their reclaim process. While their partner was successful in reclaiming VAT charged on INR 400,00,000 (€5,11,748) of expenses in the UK, our vast experience on a cursory glance led us to believe that there was a possible scope for the reclaim value to be much higher.

Problem Identified

Further study and research combined with the time spent in understanding their business, on the whole, led us to the conclusion that the partner VAT recovery agent was not looking at the complete picture and exploring all possibilities. VAT recovery vendor had identified a certain set of activities being held in the United Kingdom and were making claims for VAT recovery there  While they were successful in reclaiming VAT on the INR 40,000,000 (€5,11,748) of spent on different business travel and related activities in the United Kingdom, lack of expertise and no local presence in other countries the vendor never looked into other eligible countries where foreign VAT can be reclaimed. This led us to believe that there was a possible scope for the reclaim value to be much higher.

Solution Proposed

Our comprehensive VAT recovery audit and after analyzing the reclaims made by the vendor in the last five years, we presented findings:

  • Detailed business travel and expenses report across different European countries and % of VAT charged.
    Total eligible expenses on which VAT can be reclaimed.
  • Out of eligible expenses, total VAT reclaimed by the current vendor and missed out VAT reclaims.
  • Comprehensive POA to reclaim Foreign VAT for all eligible expenses in different countries.

This study led us to the discovery that apart from the VAT on INR 40,000,000 (€5,11,748) spend that they were claiming, there was an additional expense of  INR 30,000,000 (€3,83,811) on which no VAT recovery was done.

Our immediate recommendation was enabling the audit of the documentation and bills available for the additional geographies and expedite the application of VAT recovery filing as most countries in Europe allow to reclaim the VAT as far back as one year only.

Outcome

Increased savings by broadening the reclaim process on additional expenses of INR 30,000,000  (€3,83,811).  Are you claiming the maximum possible returns? Fill in our free assessment form and find out!

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