Amex Offers VAT Reclaim - 2005-06-20

American Express last week announced a partnership with Seattle-based Corporate VAT Management to offer clients value-added tax refund services. Amex said it is leveraging its customer spending data to help identify VAT reclaim opportunities available to companies spending in foreign countries.

"We have extensive spend data throughout the world for all of our multinational clients," said Shane Berry, vice president of the global client group, of American Express Global Corporate Services. "We'll look at their data and identify for corporations where we think it will make sense to pursue a VAT reclaim opportunity."

American Express said it is making the services available to its largest corporate clients, "typically those clients with more than $1 million in international spend," the company said in a statement. Yet, Berry said other corporate card users could leverage VAT reclaim services. Although there is no upfront cost for the service, Corporate VAT Management takes a percentage of VAT returns.

American Express said U.S.-based companies annually spend hundreds of millions of dollars on value-added taxes—a general consumption tax levied by more than 130 countries—when overseas. While such core travel and entertainment spending categories as hotel and car are applicable for refunds, a large opportunity also exists in other foreign goods and services: "professional services, conferences, translation fees, business equipment and the cost of short-term office facilities," the company said in a statement.

Berry said customers of all Amex commercial card offerings—including meetings and purchasing cards—can leverage the Corporate VAT Management partnership for reclaims.

"VAT refunds are typically 2 percent to 6 percent of a client's international business-travel-related spending. For example, a large corporation that incurs $6 million in international spend could save approximately $180,000 of that cost through participating in VAT reclaim," an Amex statement said.

John Powell, president of Corporate VAT Management, said many companies have yet to grasp which expenses warrant a reclaim. "Companies spend probably in the billions in value-added taxes, and probably what companies are getting back is in the low hundreds of millions," he said.

While American Express said it will help corporate customers identify where VAT reclaim opportunities lie, Corporate VAT Management will help track down the necessary documentation to file for a reclaim.

Although the Internal Revenue Service modified rules for tax filing last year to enable imaged receipts and—depending on the dollar threshold— U.S. charge card receipts, Berry said foreign regulators of value-added taxes require hard-copy receipts.

"For the various VAT authorities to accept a filing for a VAT reclaim, you have to provide them with original receipts," Berry said. "A corporation could have thousands or hundreds of thousands of receipts, so in many cases it's like finding a needle in a haystack."

Powell added: "It's a rationalized process to gathering paper, which can be multifaceted. You can gather documents out of file drawers, you can gather documents instream through the expense processing and you can also gather documents by working closely with vendors to get them better at managing VAT invoices. You can't do that without the data."

Berry said Amex would build customized programs in conjunction with Corporate VAT Management depending on customer needs and expense management processes.

"If we have an ongoing relationship with a corporation in this particular area, it includes regularly monitoring the spend data, identifying where the opportunity exists, prioritizing that opportunity, because you don't want to go after every receipt as there's a cost-benefit scenario," Berry said. "You're not going to spend weeks trying to track down a $10 refund opportunity, but a $175 refund opportunity may be worthwhile. There may be 12 or 20 or 30 of those opportunities all in one place."

Berry said Amex tested Corporate VAT Management's systems and worked with clients for more than one year to launch the VAT reclaim partnership.

MasterCard International and some Visa issuers for years have offered comparable VAT reclaim services through their corporate card programs. Marcie Verdin, MasterCard corporate payment solutions vice president, said the payment provider six years ago partnered with Irish VAT reclaim service provider Fexco, which through client referrals offers comparable services to MasterCard clients. "Those companies that use it, love it, but a lot of companies don't use it," Verdin said. "It's a good program but we need to continue to promote it."

Visa's largest U.S.-based issuer U.S. Bank also has partnered with Corporate VAT Management for reclaim services.