Money matters are always serious topics to discuss especially where business and taxation is involved. Companies need money to start, operate and continue their businesses; and sometimes, it involves paying value added taxes to services or products those companies often get reclaims from like value added tax.
Basically, a VAT or Value Added Tax is a kind of compulsory contribution mandated by certain governments on products and services for additional revenue. VAT is collected from every step of the selling chain from manufacturers to distributors, wholesalers, retailers and customers; whereas a sales tax is only collected from the customers or the end user.
Another difference between sales tax and value added tax is that VAT is recoverable, unlike sales tax wherein only customers pay the tax. Although not all countries have this kind of tax system deployed, it’s still important to know the inclusions and what kinds of purchases are reclaimable by your business.
How to Know a Purchase is VAT Recoverable
It doesn’t matter if your business is big or small in scale, or whether it’s an established brand; your company will be governed by the tax and employment laws in the area that you are operating in. Aside from those details, where your transactions are taking place, will play a part on how your company can ask for VAT refunds. It’s easy to consult an expert, or check online resources; but there are things you can process for yourself, just as long as you remember the key aspect that makes VAT Recoverable:
- It has to be a business expense. Whether the transactions have taken place in your own country or in another, particularly in Europe, the main thing to remember about recovering VAT is that you can reclaim the VAT that is paid for products, services and accommodations that were used by your company. If the purchase can also be regarded under personal use, then you can claim the portion of the VAT used for the business.
- It has to be within a certain timeframe. When you process for a VAT reclaim, you have to do it within a time period of up to 30 days. There may be some countries or tax bodies allow a longer grace period of up to 90 days, depending on conditions being set.
- Make sure you turn in complete documents and receipts. In order to make sure that the receipt is valid and the VAT is recoverable, check it for the following information:
- Invoice date (month, day and year)
- Company name and address. When you are an employee of a certain company and you are on a business trip, make sure that in you indicate the name of the company in the receipts and not your own.
- Complete details of the goods or services provided by the merchant.
- The shop or supplier’s name, Address, and VAT registration number. If you are traveling, this could apply to hotels, motels and other accommodations.
- Invoice total, excluding VAT
- Rate and amount of the VAT charged
It’s important to know when VAT can be recovered and it’s equally important to learn about how to make sure these amounts are reclaimed. We’re looking at millions of unclaimed VAT every year; businesses could have used that amount to further fund their endeavors and create innovations.
Author Bio: Meet Morakhiya is a content strategist, expert freelance writer, and online entrepreneur. He graduated from Ahmedabad University with a degree of Bachelor of computer application. He enjoys sharing information, inspiring people, and writing pretty much everything that helps small businesses, build brand awareness, engage their target audience and generate more leads. He is an intern at AndroidHeadlines and a Benzinga contributor. For more info you can drop him an email.