To strengthen their balance sheets sooner rather than later amid the coronavirus-caused economic downturn, some companies for the first time are reclaiming value-added taxes their business travelers paid on items and services while on trips.
To help them, many governments around the world have cut VAT rates, relaxed tax deadlines, postponed VAT payments, suspended penalties and expedited their VAT refund processes. For example, Belgium is allowing companies to request a deferral of their VAT payments, and Ireland has suspended interest on late VAT payments for January and February for small and midsized businesses.
Some companies are leaning on their VAT reclaim partners to find savings as quickly as possible. "We have some of our Fortune 500 clients coming to us asking, 'How we can get all of our paperwork up to date so we can start generating just a bit more cash flow?' " said Mark Berger, CFO of VAT reclaim firm Global VaTax CFO.
RELATED: Simplifying VAT Reclaim
"While other industries are slowing down, we are certainly seeing it ramp up for us," said Joe Healy, director of strategic partnerships for TaxBack International. "We've closed a lot of deals in the last four weeks."
RELATED: What's It Like to Work with a VAT Reclaim Company
Some big companies that already reclaim VAT are taking what they can get today, even if it is a relatively small amount. "The magnitude of the virus' impact on our business is in the billions, and what we are getting back is obviously a very small percentage of that," said Brandon Weiss, VP of business process management for AEG Worldwide, a global sports and music entertainment company. AEG Worldwide has partnered with TaxBack International since 2015. "Every dollar counts, but it's not that big in the grand scheme of things," Weiss said.
One advantage for companies that have not reclaimed VAT taxes before is that they can reclaim accumulated taxes paid in years prior. Countries typically allow companies to reclaim VAT taxes paid on business travel in the past four years, with some allowing up to six years, according to Healy. "If you take four years of average expenses in a particular country, you do a robust [VAT] audit, you can find hundreds of thousands of dollars for a large multinational and tens of thousands of dollars for small to medium-sized businesses," Healy said.