It's still possible to recover European VAT (Value Added Tax) paid out this year, but your deadline to do so is fast approaching.

You may be unaware that your US company is entitled to recover VAT on expenses incurred in the UK or continental Europe – including expenditures on trade shows, VAT charged by your European suppliers, and even VAT on hotel rooms for the European travel of your US employees.

Through a 13th Directive Reclaim, European Union legislation allows for non-resident EU companies (like those based in the US) to recover VAT on expenditures incurred in the EU. This can often be a significant recovery, as VAT charges range from 15% to 22% depending on the country. (VAT in the UK, for example, is 17.5%.)

If you are eligible for this recovery, you must follow these required procedures:

1) Submit your claim before the inflexible deadline.

- For the year (12 months) ended June 30th 2006, the deadline for filing your refund application is December 31, 2006.

- VAT charged prior to July 1st 2005 is, unfortunately, already outside of the time limit, and these VAT expenditures are no longer recoverable.

2) Submit Documentation

- Your claim must include original vendor or supplier invoices – copies are not acceptable.

- Obtain an original IRS Form 6166 for each country in which you seek a VAT refund. (Form 6166 is a certificate issued by the IRS certifying that the US company is a “bona fide trading company” that is thus eligible for a refund of VAT paid in the EU.)

- Prepare and file all refund applications appropriately (i.e. in the local language).

To avoid confusion and enhance cash flow, we recommend that you adopt the good practice of filing a 13th Directive VAT reclaim twice per year. A first filing for your expenditures in the period January 1st through June 30th must be made before the end of December. A second filing for expenditures in the period July 1st through December 31st should be made in the following June.

We offer this information as a small example of the assistance High Street Partners can provide you as you manage the finance and operational requirements of your firm's international entities. If you'd like to know more about the 13th Directive VAT reclaim and how High Street Partners can help you with other issues as well, please contact us at 1.888.881.6576.

Frequently Asked Questions

Will I need one application, or several, to secure my appropriate EU VAT refunds?
That depends on the number of different countries in which you seek a refund of VAT paid. A refund application needs to be made in each country where VAT has been incurred and a refund is being sought.

Is VAT paid to my EU suppliers eligible for a refund?
It is possible that there are actually two approaches that will ensure these VAT payments are refunded. Firstly, VAT paid to suppliers is as refundable as any other EU VAT payments made, so as long as the reclaim is processed correctly (timeframes, appropriate documentation, proper filings, etc). Moreover, depending on the nature of the expenses, it may be that you should not have been charged VAT by your supplier in the first place. For example, expenses relating to advertising, consulting and printing are typically exempt from VAT charges when invoiced to a US company. If this is the case, then there is no time limit to seek the VAT adjustment and associated credit from the supplier who inadvertently charged you VAT.

What are the fees involved with applying for a VAT refund?
HSP's fees to assist with this initiative are negotiable. Some clients prefer that our charges are on a complete contingency fee basis, where any costs to you arise only on a successful VAT refund being paid. Others prefer one flat fee per country, no matter the amount. In our experience, when the VAT refund approximates $2,000 or more per country, it is generally worth considering.

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