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With global business travel spend expected to advance 5.8% each year – reaching $1.6 trillion in 2020 – T&E isn’t just a complex expense for many organizations, it’s a significant one. For the average organization, T&E accounts for up to 12% of its annual budget, second only to payroll. A significant portion of this spend, however, may be recoverable in the form of Value Added Tax (VAT) reclaims.
The good news is that VAT recovery is possible in more than 40 countries around the world. For companies with employees that travel to any of those countries, a percentage of tax in many expense types can be potentially be reclaimed. The bad news, is that the reclaim process can be difficult to manage. In Europe alone, 28 countries exercise VAT, each with its own set of constantly changing recovery rules, accepted practices, and names.
Not only can reclaiming VAT on T&E expenses be a surprising source of hidden cash, but it also enables organizations to stay in compliance with global tax rules. As with any expense management program, the key to successful VAT reclaim begins with a clear and enforced policy including:
Details of what is and is not reimbursable
Business travel guidelines
Mileage and fuel rates for reimbursement
Personal expenditure rules
In order to reclaim VAT, the specific tax regulations for each country must be followed in order for tax authorities to approve the VAT refund. An end-to-end process is equally important to policy enforcement, as it creates an audit trail and ensures appropriate documentation is in place. Unfortunately, this could mean hours of data gathering, manual data transfers and manual reports. Language variations, changes in time zones and currency issues add further complexity to the VAT reclaim process – and further strain on resources.
An integrated solution simplifies the laborious VAT recovery process, while intelligent knowledge-based automation ensures a maximum VAT refund. Companies such as Taxback International, VAT IT, VATBox, Cash Back, and SimNomics provide pre-built solutions that do just that. By connecting directly to Concur Expense, data acquisition happens securely in real time, eliminating manual processes. The true value of an integrated solution, lies in the ability to leverage your existing T&E data to maximize eligible VAT refunds and ensure that ineligible items aren’t repeated:
