VAT Principles & Directives

WHAT IS VAT

Value Added Tax is an indirect tax on consumer expenditure. VAT is charged and collected at each stage of the production process and not only on the final sale. VAT is normally borne by the consumer in the price paid for goods and services.  It is also charged on business transaction.

VAT PRINCIPLES AND DIRECTIVES 

·        European VAT Directives – introduced to level the playing field between European 

         Companies in reclaiming VAT 

Companies can now reclaim the VAT on business-related expenses:

·        6^th Directive (local country)

Allow Companies to recover VAT on local business expenditure

Inspection available

No invoices

Tax Status Known

·        8^th Directive (late 70’s)

Allow EC registered businesses to recover VAT across the EC

No inspection options

Provide Invoices

Tax certificate for Status

Queries

·        13^th Directive (80’s)

Allow non-EC registered businesses to recover VAT across the EC

No inspection option

Provide Invoices

Tax Certificate for Status

Queries

Although the Directives provide the framework of the VAT system for the EU, some EU countries have stricter rules and regulations than others or interpret rules differently. This is where ASSOCIATED VAT RECLAIM COMPANY LLP has acquired technical expertise and is able to provide clients with a sound, quality service. It must be noted that Associated VAT Reclaim Company LLP does not make rules and regulations, the VAT Authorities do!

The most common of restriction is "Reciprocity". Reciprocity means that some foreign Companies cannot claim VAT from certain EU countries if the country that they are from does not have a VAT refund system itself. As a result some 13th Directive claimants may not be able to claim from all EU countries.

VAT RECLAIM

·        It is estimates that 42% of European Companies don’t recover cross-border VAT

·        Reclaiming VAT is complex and time consuming

-    Extracting eligible invoices requires resources and expertise

-    VAT laws and reclaim procedures vary by country and are constantly changing   

·        VAT recovery is not a core activity for most Companies

-         Finance departments are generally not familiar with the processes involves

-         Amount saved may be too small to justify significant internal resource but too 

          large to be ignored.