Have you ever come back from a vacation in Europe and found a booth at the airport that refunds the VAT tax you paid? You quickly gather your receipts to file for the refund before catching your flight home.
Many popular destinations in Europe have a VAT rate between 15% and 25%. Canadian visitors try to get the most out of their VAT refunds, but many Canadian businesses miss out on these refund options.
The EU has a VAT system similar to Canada’s GST/HST. While the EU sets the VAT rules, each member country can decide its own VAT rates and rules, which can make getting VAT refunds tricky for businesses.
Eligibility for VAT Refunds
The process for requesting VAT refunds varies across the European Union. Deadlines for refunds can be different, usually by June 30 or September 30. To be eligible for a refund, there may need to be an agreement between Canada and the country where the refund is requested. Sometimes, a fiscal representative is also needed.
To get a VAT refund in the EU, a business must not be VAT-registered in the country where they are claiming the refund and must not have done any taxable business there. Generally, only businesses based outside the refunding country can claim a VAT refund. Rules can vary, as each country has its own list of what expenses are eligible or not.
Eligible business expenses for VAT refunds can include:
- Travel and accommodation costs
- Trade fairs and exhibition costs
- Professional service fees
- Goods and services used for business
For Non-EU Businesses
Companies outside the EU that incur VAT in an EU member state, where they do not regularly provide goods or services, can claim this VAT back. The refund is processed by the member state where the VAT was charged.
Applicants must submit a refund request to the tax authorities of the country where the VAT was incurred. The application process can differ greatly from one country to another, with various forms, documentation, and deadlines.
The EU has many rules about VAT for businesses, which can be confusing, especially when it comes to reclaiming VAT paid in EU member states. However, with the right knowledge and strategy, companies can manage their VAT claims effectively and save money.
If your business has incurred expenses in an EU member state, contact a Leyton tax professional to find out if you are eligible for a refund. Don’t wait to schedule a free consultation!
