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VAT PULSE

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

You have to spend money to make money they say. But times are tough these days. With boundaries shrinking and trade barriers dropping drastically, staying competitive is not an easy task. Companies are constantly looking for new ways to save on costs and reduce the stress placed on their cash conversion cycles. So when the opportunity doesn’t knock, build a door. Changing times have presented companies with multiple ways to cut costs without the need to raise loans to meet financing demands.

The one solution that companies fail to take advantage is the one that has been available to them for ages. In today’s environment, the number of companies that are engaged in cross-border sales is innumerable. Their representatives travel across the world, conduct meetings, participate in conferences, and more. What companies track is the expenditure associated with this. What they do not track is their right to obtaining reimbursements on the VAT they pay during these travels.

What is VAT recovery and how it works?

Based on the local tax policies, companies can claim refunds on the VAT incurred on business travel and activities in certain foreign countries in line with the reciprocity established between the governments. Expenses that can be recovered in cross-border business activities are conferences, events, hotels, local transportation, food, phone and internet charges, and other cases marked as special.

For a better understanding of these categories, here is a detailed blog on VAT Refund Eligible Expenses for Business Travel to Europe.

Usually, the VAT reclaim process is complicated and tiresome. However, what is apparent is that the cause behind most Indian companies failing to claim their own money is tied to a general lack of awareness, lack of expertise, and the bandwidth to make timely applications and follow-ups. They are either unaware that they can claim a refund, or they are not sure how to do and what are the formalities that need to be met for it. What they also struggle with is having someone manage the process. The result is the loss of money like in the case of an industrial manufacturing company who came to us at CBVAT for help.

The industrial manufacturing company lost approx. 80 lakhs because they missed out on the deadline for filing.

If that amount had been claimed, there was so much they could have been done. Like a well-known startup that builds an exclusive B2B product that announced an additional incentive of 5 days everything sponsored a trip to the exotic location of Bali for their top 10 performers of the quarter. That quarter’s sales increased by close to 30%.

You can also take the example of another development company that has offices at various locations in the world. They used their refunds to fund a knowledge sharing platform that enabled their teams all around the world to collaborate. Another company enabled skilled based training that they didn’t believe they had the budget for that financial year.

Or you can also take into account the many companies who have been able to improve their infrastructure without having to put any strain on their operating expenses budget.

The biggest challenge that companies face is with having the right process to ensure that they maintain hard copies of their expenses and at the same time are also prepared with the right auditing processes needed to make a claim at the right time. This compounded into the already present challenge of not really understanding how to make a claim for a refund. Our recommendation considering the varying rules on refund claiming will always be to find the right partner, like CBVAT, to help you manage the process.

Irrespective of whether you choose to go with a partner or do it yourself, it is time to start claiming. Why leave your companies money on the table? Here are a few resources that can help you get started quickly!

Quick Start Guide List

  1. The Ultimate Guide To VAT Recovery
  2. The rate chart to give an understanding of the percentage refunds you could expect
  3. Tax calculator to give you an idea of the amount you could possibly claim

Ready for a free assessment? Reach out to us here!

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