ANN JONES investigates why so many businesses are failing to reclaim billions in taxes.
EXPENSES INCURRED BY employees whilst travelling on business (such as hotels, restaurants, transport, etc.) are subject to VAT or GST (goods and services tax) in all Member States of the European Union, as well as in a number of other states, including Canada. VAT or GST is also levied on services supplied to companies by foreign service providers, when these services are 'supplied where performed' (such services include conferences and trade shows, some professional fees, training courses, and certain inter-company services). In compliance with the EEC Eighth and Thirteenth Directives, as well as with applicable bilateral conventions, this VAT is generally recoverable from the tax administration of the country in which it was paid.
Businesses across Europe are losing out to the tune of billions of euros by failing to reclaim this value added tax as a result of the complex and time consuming European rebate system. Our research estimates that VAT on invoices paid by the corporate sector across the EU which could be reclaimed, but which are currently not, runs to over €5.5 billion a year. Most of the cost is being incurred through accounts payable invoices, inter-company invoices, hotel accommodation, transport and invoices for fuel. Much of the blame for the unclaimed billions must be laid on the overly confusing and complex rebate system which almost appears to hinder, not help, those companies who try to reclaim their VAT expenditure in-house.
The businesses ...