According to the Global Business Travel Association, each year, corporate travelers take more than 480 million business trips. If each trip costs US$1,452, as estimated by Taxback International, the associated costs can take a toll on your corporate balance sheet. With just 24 travelers that take ten trips each per year, the related fees would be $348,480 in meals, transportation, accommodations, and communications.
Now, add to these costs an increase in taxes paid on travel. That's the reality facing many organizations with the global expansion of value-added tax (VAT) regulations.
How VAT is changing
More and more of the world's governments are relying on indirect taxes as a source of revenue, creating a dramatic shift in the rules and regulations tax offices across the globe are enforcing. VAT is a massive revenue generator for the roughly 120 economies that use it. In the European Union, (EU) for instance, there is a €137B “VAT Gap” between expected and collected revenues due to fraud and non-compliance based on lack of awareness or inability to comply with VAT regulations because of complexity. To close this gap, the European Commission has proposed a significant reform of the EU's VAT system to close the gap between expected and collected revenues -- creating a sense of urgency among businesses.
What does this mean for you? As international trade in goods and services rapidly expands, so does the spread of VAT and the requirement for multinational companies to collect and pay VAT in the countries where they operate. But with the right tools, you can comply with complex and changing VAT regulations more efficiently and avoid potential audits and fines. There is also an opportunity to recover significant amounts of the taxes paid, including for employee travel, entertainment, and invoice expenses.
For those that make VAT reclaim a priority, the potential is staggering. For example, Electrolux, a leading global appliance company with employees in 42 countries supporting more than 150 global markets, has increased its VAT recovery ten-fold from €31,000 to €354,000 in just three years. Citrix Systems, another multinational, recovered $900,000 in VAT in one year.
How to reclaim more VAT
With rules and regulations varying from country to country, VAT recovery through manual efforts is prone to errors and delays. A better way is to use automation and digitalization to maximize compliance and reclamation rather than attempt to shoulder the burden of keeping up with regulatory changes and the trivialities of global tax.
Solutions that capture and validate invoice and receipt data are vital to tackling VAT, both domestic and foreign. Look for solutions that focus on artificial intelligence (AI) and optical character recognition (OCR) to adhere to the shortening windows for VAT reporting and reclamation, especially if this can start automatically assessing expense reports for taxation information. These features will help accelerate the process and minimize the amount of incorrectly completed reclamation requests. Paying attention to domestic taxes and mapping your company's tax structures is also crucial to ensure money isn't left behind.
Working with VAT experts
For the 80 or so VAT-enabled countries that don't allow cross-border reclamation, you may be able to claim back taxes under domestic policy. Doing so requires companies to have international VAT registrations in all of the eligible countries. It also requires companies to share transactional data with experts who can ensure that money usually blocked by a lack of cross-border reclamation can flow back into those business accounts.
To help companies with VAT reporting and reclamation, specialists such as VAT IT, Taxback International, and VATBox, among others, have developed prebuilt integrations for Concur Expense and Concur Invoice solutions. Available in the SAP Concur App Center, these integrations enable the automatic extraction of spend data to simplify VAT reporting, while intelligent, knowledge-based automation ensures maximum VAT recovery.
To learn more about how your firm can stay current with changing VAT regulations, read the whitepaper from SAP Concur, The Global Expansion of VAT: Implications of Digitalization, Shifting Regulations, and Emerging Regimes in the World of Value-Added Tax. Then visit us online at concur.com/reclaim-vat.