Recovery of expenditures on value-added taxes incurred in Europe could be an unexpected windfall.
If your business has incurred expenses in Europe, or if you travel in Europe for business purposes, you may be missing opportunities to recover the value-added tax (VAT) paid on expenses. Similar to Canada's GST, the VAT applies to most goods and services purchased in Economic Union (EU) member countries. However, as each country has its own VAT legislation, tax rates and the tax base will vary throughout Europe.
Refunds for Canadian business
Most of the EU member countries provide a refund of VAT paid on expenses incurred in the country by non-residents. In all cases, one of the eligibility requirements is that the home country of the claimant must offer a reciprocal rebate to EU residents. The rebate provided to non - EU residents of Canada for the GST paid on some travel and accommodation costs, as well as on items removed from Canada within a specified time period, fulfills this reciprocal rebate requirement.
Although the availability of the VAT rebate for specific expenses varies throughout Europe, the following is a list of expenses which may be eligible:
* Car hire / purchase
* Food and drink
* Luxury goods
* Petrol / diesel fuel
* Travel expenses
* Personal services
Some considerations and difficulties
One difficulty is keeping track of which expenses are eligible for the rebate in each country. For example, Germany offers a rebate on all of the expenses listed, with the exception of personal services. However, Portugal offers the rebate only on diesel fuel. Most of the other countries fall between these two extremes.
There are also other rules to keep in mind in preparing the VAT refunds, such as: refund deadlines and claim limitations; the requirement to appoint a local representative; and, language requirements. Most European countries provide that the VAT claim must be filed by June 30 of the year following the year in which the VAT was paid. The time limit in Belgium is more relaxed and is currently five years.
As non-residents, it is difficult to know which countries' rules are "carved in stone" and which may be more relaxed. In Germany, for example, the six-month time limit is strict, and only relaxed in …