During business trips throughout the year in Europe, you may have noticed how much of the costs are surrounding transport. Perhaps a lot of these costs are to rent a car, to make travelling around as fast and comfortable as possible. As with such huge expenses, typically VAT refunds can be requested for operational business costs for things such as car rental, fuel costs and even other associated costs like parking or repairs – but not everywhere in the EU can the VAT for these goods and services be recovered…
VAT reclaim deductibility of car rentals and fuel can vastly differ subject to locale, depending on which country is hosting your business trip. A hypothetical of how reclaiming VAT from identical purchases in different countries can be confusing; in Germany both fuel and car rental is fully deductible, in the UK fuel is deductible whereas car rental is not always deductible. Alternately in France, VAT on car rentals is non-refundable in some circumstances but reclaimable in others.
Due to the sheer scale of the EU, the number of countries with differing tax legislations and fluctuating possibilities of VAT reclaims, it is important to know what you can and can’t claim for depending on where you have been. VAT4U collates all the rules surrounding compliancy and deductibility into one place so you don’t have to, for an overview take a look at our BTW-KAART to help further familiarize yourself with the differences in deductibility across Europe.
Renting Cars, refilling your Gas Tank and VAT reclaim – how does it work?
An example of how differing Tax deductions can affect you upon preparation for reclaim – you are a company from Dublin, two of your employees visit Berlin, one goes to London, another two visit Brussels, two are off to Valetta in Malta and the final colleague of your employees visits Athens. All needed rental vehicles and obviously had to fuel them. Your employees returned and kept their car rental invoices and petrol top up receipts and at the end of the year you began to prepare claims…
During your claim period, you were able to recover all VAT from these expenses in Germany, in Belgium you were only able to claim back 50% of the VAT from both car and fuel, and your employees in Greece and Malta were unable to reclaim any VAT at all. The car rental in France was deductible in this case however the fuel was not, and in the UK you recovered VAT from your fuel expenses however only partially for car rental.
*A major confusion reclaiming for car rental and fuel costs is the grey area in some countries of VAT being partly recoverable, dependent on established compliancy rules. For example, if a particular journey was directly a business expense or not. In some regions there are even differentiators for fuel, so petrol might be VAT deductible, whereas diesel may not be.
A common issue we experience at VAT4U facing Clients wishing to reclaim on car rental and fuel expenses is that more frequently than not documents received are not VAT compliant documents. ‘Rental Agreements’ and ‘Rental Summaries’ for cars are not accepted by Tax Administrations for recovering VAT. Proof of payment receipts for petrol and fuels are also not accepted. Learning briefly about compliancy is just as important as discovering deductibility rules to make the process as easy as possible for yourself.
Tips & Tricks – things you need to know…
Claiming back VAT on your car rentals & fuel may seem complicated due to the differing compliancy and deductibility rules in different EU countries, but it really doesn’t have to be. There are a few simple steps you can take to make the VAT recovery process on car rentals, fuels, associated costs and other transportation expenses as smooth as possible and get a refund from your business VAT outlays – that’s where VAT4U can help…
- Preparation: familiarize yourself with what you can and can’t claim for, depending on which countries you have been gathering expenses. If you are claiming for your car rental invoices, perhaps you also have the fuel receipts and parking charges from filling up your tank that you can also include in your claim.
- Compliancy: On the topic of compliancy and processes around VAT reclaim, planning an appropriate compliant document acquisition system early makes the process seemingly smooth, ensuring your employees obtain compliant documents is the most helpful step, especially as some rental documents supplied can sometimes be uncompliant for claiming VAT refunds. VAT4U assists further with this by monitoring over 2000 compliancy rules in over 28 countries, so you don’t have to!
- Auditing: assorting all your acquired documents in a sufficient audit process, so that you can find all required invoices when you are ready, means you can prepare your claim as fast and efficiently as possible – perhaps categorize your expenses for easier data management later. With the free VAT4U Mobile app, you can do this on the move storing an electronic copy of your car rental invoices and gasoline receipts all within the app with your other expenses.
- Country Awareness: Understand the basic principles of VAT reclaim in the countries you wish to claim in – look at the VAT4U Map to inform your planning for reclaim so you can be realistic with your expectations, the VAT4U dashboard also advises you with this when uploading expenses so you know exactly how much to expect when your claim for a refund.
- Get Refunded: Upload all of your compliant car rental & fueling expenses that you wish to claim for to VAT4U, follow the necessary steps and get your VAT refunded!
Used and trusted by clients both in the EU and beyond – VAT4U is the first online tool to manage and automate your foreign VAT recovery, making it easier than ever before to reclaim for your overseas business travel expenses. Sign up now and see for yourself how easy it is to reclaim your VAT on foreign expenses.
If you have any questions about the VAT refund process in the European Union on your business expenses, our team will be happy to get you on the right track. You can either chat with us through the website chat messenger function, or contact us directly for more information or guidance.