Five Tips For Making The Most Of VAT Refunds

<H1> Five Tips For Making The Most Of VAT Refunds</H1>Filing value-added tax refund claims contributes tens of thousands-maybe hundreds of thousands-of dollars to the bottom line. Neglecting to file VAT refund claims is like calling the Internal Revenue Service and saying, "you're a bunch of nice guys. Keep my refund and apply it to the budget deficit."

Most European countries assess the VAT on hotels, car rentals, conferences and other big-ticket items. The tax usually ranges from 12 to 25 percent, depending on the country. Countries with the highest taxes on all or some travel services include the United Kingdom (17.5 percent), Germany (15), the Netherlands (12 percent on hotels, 25 percent on car rental and trade shows) and Sweden (17.5 percent on car rental).

Here is a handful of my most practical tips to get this cash back.

1. Identify relevant invoices. As a general rule, use the old "80/20" rule, whereby 80 percent of the VAT recovery is attributable to 20 percent of the invoices. Focus on the big-ticket items: hotel, car rental and conferences.

2. Don't get lost in the details. VAT recovery from other expenses like meals and taxis, and from countries where the tax is low, is possible. But processing these documents can consume an inordinate amount of precious time. And special rules may apply limiting the VAT refund in a particular country.

3. Avoid misunderstandings about employee-reimbursible expenses. For instance, when submitting a VAT refund, you must show the name of the business incurring tax expense. But in the real world, about half of the invoices are in the individual's name, not the company's.

4. Develop a corporate VAT recovery program. Develop one internally, have outside consultants assist you or hire a VAT recovery firm for design and implementation of an effective program.

They make their money by keeping a portion of the VAT refund-usually between 25 and 40 percent.

5. Don't forget VAT refunds for non-travel-related expenses.

<I>Richard S. Meyer is a CPA and president of Travel Taxes Inc., a Highland Park, Ill., firm specializing in consulting on money-saving travel tax strategies. He is the author of a recently published booklet, "120 Money Saving Travel Tax Tips.