European tax does not have to be a cost...but the rules are changing

Have you incurred Value Added Tax in the European Union (EU)?

If your organisation has incurred business costs in Europe – be it for conferences, meetings, researching expansion opportunities or more in-depth business activities – you are eligible to reclaim the Value Added Tax (VAT) incurred on most such expenses.

The EU VAT system is extremely complex, with EU Member States implementing numerous local laws, conditions and procedures in respect of VAT. However, each Member State does have at least one thing in common – they all have a VAT refund mechanism for Australian businesses!

Provided certain general conditions and the local requirements are met, you would be entitled to recover VAT incurred in the EU, where:

• your business has no establishment in that country
• your business does not make any supplies in that country (with some exceptions)
• you can evidence your EU expenditure
• you submit a claim within the time limits, in the local language and the correct format

If your company is already submitting EU VAT refund claims, you need to be aware that the rules are changing. Effective from 1 January 2010, the VAT refund mechanism will alter.

The main changes are:

• claims will be submitted electronically through a portal
• a requirement to code your expenditure
• an extension of time limits and
• a tightening of procedures for the local tax offices (good news for the taxpayer)

At Grant Thornton we have extensive experience in successfully recovering VAT incurred in the EU for our clients and have staff with experience of various European VAT systems. We can take the pain out of navigating the rules and differences between various Member States. We can also advise whether VAT has been charged correctly by EU suppliers (if it has not been charged correctly, it is not refundable). In instances where you are setting up in the EU, Grant Thornton can advise on VAT/Tax efficient structures, assist with ongoing compliance, provide general consultancy services and negotiate with local tax offices.

Please contact us should you wish to discuss any of the services we can offer you, or if you would like more information.

Author: John Davison, October 2008

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