Since officially launching in February 2013, value-added tax
recovery firm Taxeo said it signed eight clients and enrolled as affiliates 200
hotels, 80 of which already are connected to the service. Based in France and
offering recovery services for 29 European countries, the firm said it is in
discussions with 40 more corporations that are clients of partner BCD Travel.
Taxeo aims to simplify and expedite VAT recovery by fully
automating the reclaim process. CEO Jean Cazes describes the preexisting VAT
recovery process as a "19th century system" that requires tax agents to
manually sort through boxes of invoices and T&E reports.
"It's an extremely laborious, expensive, time-consuming
and non-efficient process, and that's why €5
billion are left on the table every year," Cazes said. "Taxeo
automates the invoicing process all the way from the merchant to the tax
authorities, cutting the client's involvement down to the absolute minimum."
Business travelers in Europe are entitled to reclaim tax
spent on certain items including hotel stays, car rentals and restaurant bills.
However, VAT recovery is complicated; the specific items for which companies
can reclaim tax vary by country and are governed by different requirements and
processes. VAT can range between 15 percent and 25 percent of a purchase, depending
on the country.
VAT recovery for U.S. companies is further complicated by European
tax authorities requiring original invoices, whereas European companies can
submit electronic invoices when claiming VAT from within the European Union.
Because of this tedious process, billions of euros worth of
VAT go unclaimed each year. About two-thirds is generated from corporate travel,
according to accepted industry figures.
"When tax agents search and find an invoice that has
some international VAT on it and is recoverable—and the amounts aren't
ridiculously small—they then take the invoice or paper and submit a claim for
each country manually," Cazes says.
However, in many cases, the invoices are not tax-compliant.
For example, hotel invoices, which account for the bulk of recoverable VAT
items, usually are issued in the name of the employee instead of in the
company, making them ineligible for a VAT reclaim. To submit a valid claim, agents
therefore must request from the merchant a new invoice with the name of the
company.
Taxeo claims it simplifies the process by providing
travelers with a unique identification number that merchants can access through
a scannable Taxeo card, company or user profile, or a smartphone (through the Apple
Passbook or similar functionality on Android devices) as a Taxeo iOS native app
or a digital card saved in the smartphone’s photo album. The merchant's back-office
system electronically transmits the invoice data to Taxeo for itemizing,
analyzing and creation of a tax-compliant invoice. Taxeo then sends the claim
to the appropriate tax office for recovery.
The recovered funds automatically are transferred to a client's bank
account. Travel or finance managers can monitor online the status of previous
and current claims.
By partnering with Micros Systems, a tech firm serving the
restaurant and hospitality sectors, and working with large clients to customize
the solution, Taxeo has signed 200 hotel participants.
"If a client has a preferred hotel program, up to 80
percent of their business is usually concentrated on 20 percent of properties,
so a relatively small number of hotels on board means a large share of
refundable VAT can be recovered automatically," Cazes explained. "For
the first time, this creates a direct benefit between upfront hotel program
management and the back-end VAT recovery opportunity, maximizing the financial
benefit of negotiated rates and VAT refunds.
"By hooking up with Taxeo, hotels become cheaper and
more competitive by the amount of VAT for their best international clients,"
Cazes added.
Because most hotels are not Taxeo affiliates and because
Europe requires U.S. companies to submit original invoices, Taxeo also manually
processes VAT reclaim when needed.
Guillaume Leclerc, BCD Travel senior manager of strategic
marketing for product planning and portfolio development, said the TMC "decided
it's not only the problem of tax experts—it's becoming a problem for travel
managers as well because of the big envelope of money left on the table each
year."
Taxeo claims to be the first of its kind to fully automate
VAT recovery. While other firms also may claim to offer such automation, Cazes
said it's likely not comprehensive throughout the entire process. Other firms,
he suggested, may have automated the scanning and emailing of electronic
invoices, or developed monitoring tools to search for recoverable VAT items.
While this may expedite the process, if the invoice is non-compliant the core
problem still is there, Cazes said.
Taxeo claimed to eliminate the need to search through files
because the necessary information is collected at the point of sale to create a
compliant e-invoice addressing the specific requirements of each EU member
state's tax authority.
Tax recovery firm Meridian confirmed its process is manual,
although it applies certain automated procedures throughout its recovery
system.
"The VAT recovery system must be more or less manual
because most of the authorities require the original invoices," said
Meridian senior VAT manager Zdenek Vajnlich. "Whoever does the VAT
recovery still needs to get ahold of original invoices."
At another such firm, Euro VAT, CEO Britta Eriksson said an
automated solution like Taxeo's would be "workable and good" within
Europe, but not particularly practical for the U.S. market where companies
still are required to submit original invoices. She suggested that it wouldn't
be practical to introduce an ID system for the relatively few U.S. employees
traveling to Europe. Eriksson said the typical U.S. company travels 10 percent to
20 percent internationally, and only 5 percent to 10 percent to the European Union.
"It's very hard to implement [a system] with that in mind," she said.
Eriksson also noted that because Europe two years ago
stopped charging VAT on certain items including marketing, tradeshows and
exhibits, it may not always be worthwhile for companies to go through the
tedious recovery process.
But Cazes said that proper invoicing "this is the key
point of our solution. The electronic invoices we issue are tax-compliant and
original. Therefore, there is no need to gather the paper invoices to submit
claims. This is what makes Taxeo different in the VAT recovery industry."