The process of reclaiming VAT from European countries requires an in-depth knowledge of deadlines and submission requirements. This guide simplifies things.
VAT can pose a significant expense for shippers moving goods in the EU from beyond its borders. The good news is that non-EU shippers are awarded opportunities to reclaim VAT paid within the EU. However, the process can be intimidatingly complex — it varies from country to country and depends on certain criteria and compliant documentation.
What follows is a comprehensive guide to reclaiming VAT from the EU to help global shippers navigate the process effectively.
Understanding VAT for non-EU shippers
Whenever a non-EU company incurs expenses in an EU member country — such as shipping costs, warehousing, or other services associated with moving goods in and out of the EU — it may be necessary to pay VAT on those services. VAT rates vary significantly depending on which country or countries you are shipping to; however, the costs can (and do) add up quickly.
Fortunately for non-EU shoppers, VAT is typically refundable for business expenses, assuming that the country where the VAT was paid has a reciprocal agreement with the country of origin. Each EU member has its own VAT refund procedure, so having a firm understanding of the specific rules pertaining to each jurisdiction is crucial for uninterrupted operations.
What are the conditions for VAT refunds from the EU?
To be eligible for a VAT refund in the first place, shippers generally need to meet the following broad conditions:
- The business must be legally registered outside of the EU, and should not have a fixed establishment in Europe
- VAT refunds strictly apply to business-related expenses, such as shipping costs. Personal expenses do not qualify
- Businesses seeking a VAT refund must not be liable to pay VAT within the EU, meaning that they cannot be involved in any transactions in the EU that would warrant VAT registration
- Some European countries require a minimum refund threshold for the company to be eligible to claim. These minimum thresholds vary from country to country
How to reclaim VAT as a non-EU shipper: a broad overview
Once you’ve established that your business is eligible for a VAT refund from the European country of destination, you can begin the process of reclaiming. The process can vary considerably from country to country, but here’s a general overview of the steps you’ll need to take:
- Identify the eligible expenses. Identify the expenses on which VAT was paid and verify that they are eligible for a refund from the European country you paid them in. These expenses commonly include things like freight forwarding, storage, and warehousing costs. Each country in the EU has its own list of refundable expenses, so an in-depth knowledge of the national VAT office’s guidelines is an asset here.
- Prepare the necessary documents. Most EU tax authorities require specific and detailed documentation for VAT refund claims, including (but not limited to) invoices, proof of payment, and certificates of registration. There are also certain conditions that the documentation must meet for it to be compliant with the regulations of the relevant authorities. Keeping your documents carefully organised at every stage of the process can expedite this step, but it does require a huge amount of administrative legwork.
- Submit the refund application. Each country in the EU has its own refund portal, procedures, and deadlines, so take care to research the relevant details before submitting your refund request to the correct tax authority. Some general tips to keep in mind include:
- Be mindful of language requirements in select countries
- Check whether the country in question accepts digital applications or if only paper submissions are accepted
- Stay informed about submission deadlines!
The relevant tax authority may be in touch for additional information if required. Bear in mind that it can take several months for applications to be reviewed.
Common VAT reclaim pitfalls (and how to avoid them)
Everyone is prone to mistakes but, in a heavily bureaucratic process such as EU VAT reclamation, delays can become costly. Here are the most common pitfalls associated with VAT reclaim and how to avoid them:
- Incomplete documentation. All invoices, certificates, proof of payment, and more must be complete and meet the national requirements of the country you are claiming from.
- Submitting the wrong form. Each country in the EU may have different application forms, so be sure to use the correct one for the country from which you are claiming.
- Missed deadlines. It can be easy to overlook submission deadlines, especially if you are managing shipments to different member countries of the EU. However, missing a deadline could result in a rejection of your refund application.
- Ineligible expenses. It’s absolutely critical that you verify the eligibility of each expense type before claiming it, as claiming ineligible expenses can lead to headache-inducing delays or denials.
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The re:TRADE portal makes it easy for businesses to expand into new regions without giving a second thought to keeping up to date with country-specific VAT registrations and filings. With hands-on service from re:TRADE, you can export, transport, and import with confidence that your operations are fully compliant with the region of your choice.
