Cutting Your Accounts Payable Bill
Accounts Payable (AP) invoices are typically high expenses for your business. If that’s not enough, VAT\GST on your AP invoices can add up to 25% of the cost to your invoice. While that seems high, what makes it even more disturbing is the fact that an overwhelming number of businesses charge VAT\GST incorrectly.
Having the right partner in place to help with your recovery could be the difference between reclaiming funds or watching it simply disappear.
When VAT\GST is correctly assessed on a cross-border invoice, businesses often can recover that extra expense, using one of the foreign VAT\GST reclaim mechanisms that have been put in place. This handling of VAT\GST recovery is made directly to the government’s tax authority, by submitting the relevant application form and supporting documents.
Even though the European Union has its rules for the EU member states, within each member state there can be additional rules which differ, and the applications are treated differently. For example, in France businesses are unable to recover VAT\GST on petrol, public transportation, or accommodation, while Germany and Italy allow businesses to reclaim VAT\GST for these types of expenses.
Procedurally, there are differences as well. Denmark and the Netherlands don’t require electronic copies of invoices to be attached to the refund application, while Spain requires it on invoices that are over EUR 1,000, and Italy requires it for all amounts.
The treatment of handling wrongly charged VAT\GST is different, and you might be surprised how common it is.
It’s easy to understand why vendors make mistakes on their invoices. Penalties for undercharging and then underpaying VAT\GST across Europe can be as high as 100%. To complicate matters, VAT\GST rules may change from time to time, and be difficult to understand.
For example, in 2010 the EU set up a reverse charge mechanism, which allows companies to zero rate invoices for VAT\GST if the place of supply is outside the seller’s country. However, the rules for zero rating require that the customer must be registered for VAT\GST in a different country, and that the seller obtains and retains the customer’s VAT\GST registration number, including the country prefix. Additionally, both the supplier and the buyer’s VAT\GST numbers must be included on the sales invoice, and the goods must be transferred to another member state.
Sounds confusing. Couple that with high penalties, and it’s easier for accounts payable teams, who are not VAT\GST experts, to just tack on the VAT\GST to the invoice. It protects them from making a mistake and doesn’t cost them anything.
For companies looking to reduce costs, having a VAT\GST expert like WAY2VAT review invoices is the first step toward recovering unnecessary payments from the supplier. WAY2VAT can find invoicing mistakes in the form of overcharging VAT\GST, address it directly with the supplier, and recover those funds on your behalf
Wading through the different rules and requirements can be confusing, and often finds companies leaving money unclaimed. WAY2VAT’s recovery services, ensures maximizing the potential of VAT\GST recovery for your business. WAY2VAT has the deep VAT\GST experience and AI tools you need to reclaim and recover your VAT\GST. Request a demo and see how much money you can recover.