As a small business, you likely manage every penny carefully. You know how important it is to control costs, especially when it comes to business expenses that involve foreign transactions. But there’s a common misconception that small businesses and freelancers aren’t eligible to reclaim foreign VAT (Value Added Tax) on their business-related expenses abroad.
Myth: “I’m a small business, so I can’t reclaim foreign VAT.”
Truth: Small businesses can reclaim foreign VAT — and if you travel or incur business expenses abroad, you might have cash waiting to be refunded to you.
In fact, regardless of your company size, if your business pays VAT while purchasing goods or services abroad, you may be entitled to reclaim it — potentially unlocking significant refunds.
Here’s everything you need to know about reclaiming foreign VAT as a small business or freelancer, and why you should never leave money on the table.
What Is Foreign VAT and How Can Small Businesses Reclaim It?
Foreign VAT refers to the tax paid on goods and services purchased in a country outside of your home country. For example, if you travel abroad for a business trip to Germany, France, or the UK, and you incur expenses such as hotel stays, meals, or transportation, you may have paid VAT on those purchases.
Even if your business isn’t VAT-registered in the foreign country, you may still be eligible to recover the VAT that you paid on these eligible expenses. This means that freelancers, consultants, and small businesses are all eligible for VAT refunds on foreign business expenses — regardless of company size.
Why Should Small Businesses Care About Reclaiming Foreign VAT?
As a small business, every euro counts. VAT refunds can be a valuable source of working capital that can help improve cash flow, cover operational costs, or fund business growth.
Here are a few examples of how small businesses or freelancers might be able to reclaim VAT:
- Business Travel Expenses: If you travel to another country for a conference, client meeting, or business-related event, the VAT paid on hotel rooms, flights, taxis, and meals could be reclaimable.
- Professional Services: If you purchase services from foreign consultants or legal advisors, VAT could also apply to those transactions.
- Business Supplies: VAT paid on goods or services that are directly related to your business operations, such as equipment or materials, might be eligible for a refund.
These expenses quickly add up, and reclaiming the VAT could provide your business with a significant financial boost.
How Can Small Businesses Start Reclaiming Foreign VAT?
Reclaiming foreign VAT can seem like a complex process, but it doesn’t have to be. Here’s how small businesses and freelancers can get started:
1. Identify Eligible Expenses
The first step is identifying which of your business-related expenses qualify for VAT refunds. As mentioned, common categories include travel, accommodation, business services, and supplies that are directly used for your business activities abroad.
To be eligible for VAT reclaim, these expenses must be:
- Directly business-related
- Paid while traveling or doing business in foreign countries
2. Gather Your Receipts and Documentation
In order to reclaim VAT, you’ll need to keep accurate receipts and invoices that clearly show the VAT amount paid. Make sure the receipts have all the necessary information, including the supplier’s VAT number, the date of the transaction, and a description of the goods or services purchased.
In some cases, receipts may need to be translated or presented in a specific format, depending on the country where the VAT was paid. This is where working with a VAT expert can save you time and effort.
3. Submit Your VAT Reclaim Application
Once you’ve identified eligible expenses and gathered all the necessary documentation, the next step is to submit a VAT reclaim application to the relevant tax authorities in the foreign country. This process often involves filling out forms, providing supporting documentation, and submitting the claim before a specific deadline.
The rules and forms differ from country to country, but don’t worry — you don’t have to navigate this maze alone.
4. Use a VAT Reclaim Expert
For small businesses and freelancers, handling the technicalities of VAT reclaim can be overwhelming. Fortunately, working with a VAT reclaim expert can help ensure you don’t miss out on refunds and that your application is submitted correctly and on time.
An expert can help you:
- Maximize your eligible expenses
- Complete and submit the necessary paperwork
- Ensure compliance with each country’s VAT regulations
- Track your refund progress and manage any issues with foreign tax authorities
Why Small Businesses Shouldn’t Miss Out on VAT Refunds
Many small businesses assume that VAT refunds are only for large corporations, or they think the process is too complicated for their needs. The truth is, VAT refunds are available to businesses of all sizes, and reclaiming foreign VAT is a valuable opportunity that shouldn’t be written off.
Here are a few reasons why small businesses and freelancers should consider VAT reclaim:
- Improved Cash Flow: Reclaimed VAT puts money back into your business, which can be used for operational expenses, expansion, or reinvestment.
- No Business Too Small: Whether you’re a sole trader or a small team, you’re still eligible to reclaim VAT if you meet the criteria.
- Don’t Leave Money Behind: If you travel or spend money on business-related expenses abroad, there could be cash waiting for you in the form of VAT refunds.
- No Need to Be VAT Registered: Unlike VAT-registered businesses in foreign countries, you don’t need to be VAT registered to qualify for a refund as long as the expenses were for business purposes.
Get the Help You Need to Reclaim Your VAT
Reclaiming foreign VAT can be a straightforward process if you have the right support. If you’re a small business or freelancer who has incurred VAT on business-related expenses abroad, don’t leave money on the table. Partner with a VAT reclaim expert to navigate the process with ease.
Curious how much you could reclaim? Take Advantage of a Free VAT Assessment
To determine your potential VAT refund and learn how VATcube can help your business, take advantage of our free VAT assessment. Simply contact us through our FREE VAT Assessment form and our team will be happy to assist you.
By understanding the intricacies of EU VAT refunds and leveraging the expertise of VATcube, businesses can effectively recover their eligible VAT, optimizing cash flow and enhancing their financial performance.
Contact us today to start reclaiming your foreign VAT and unlock your business potential.