Navigating the minefield of international value-added tax (VAT) can be tricky for U.S.-based companies. Many companies feel they have it covered, yet each year billions of dollars of VAT go unclaimed. In fact, nearly two-thirds (69%) of U.S. companies revealed that they are not confident that their company is reclaiming VAT from their U.S. travelers going overseas. More than a quarter (29%) are somewhat confident while only 2% are very confident.
According to Global VAT Manager, Judith D’Aguilar from Citrix Systems, Inc. “These findings are not surprising. Reclaiming VAT is less mature for U.S.-based companies versus those based in Europe.”
Why U.S.-based companies lag behind
As U.S. employees travel around the world, the VAT tax they incur can often be reclaimed from the tax authority by their employer. In the past, many felt this was a true headache and administrative nightmare: understanding the individual country reclaim rules, educating travelers as to their responsibilities, gathering spend data and acceptable receipts and submitting them in a timely manner to the applicable tax authorities. However, today the advent of electronic receipt capture, cloud technology and the ability to aggregate travel and expense data on one platform can make this process quite painless.
Trends driving change
Nearly half of companies (42%) cite containing costs as the leading reason that U.S.-based organizations are re-evaluating their workflows and processes in this area. Other reasons include globalization, more travelers (22%); new government reporting standards (20%); digital capture of receipts (11%); and employee satisfaction (4%).
It’s inevitable that as companies become more global they will have more international business travelers, expatriates and other mobile workers. For U.S.-based companies, this creates some new areas of risk when it comes to complying with various government tax and other regulations. However, as our case study later shows, reclaiming international VAT should be viewed more so as the silver lining in the minutiae.
Who and what department spearheads reclaim
Every company has a unique approach. Some companies manage reclaims internally and at SAP Concur we facilitate this by applying country-specific templates during the implementation process that ensures accurate data gathering and rapid enablement. Other clients tap app center partners that specialize in VAT reclaim to provide an end-to-end solution leveraging their data in SAP Concur.
According to SAP Concur research, tax, finance and travel managers are most likely the ones within organizations managing this process.
Case Study Results
Companies moving from expenses with poor reporting typically see a 75%increase in reclaimable VAT after switching to SAP Concur, according to a study by VAT reclaim specialist company VAT IT. While this is not true for every client or every circumstance, it was certainly found in the 25 companies analyzed by VAT IT that utilized their solution and SAP Concur.
To find out more about this topic listen to International VAT: So You Think You Have it Covered on-demand webinar now.