Don’t get caught out by changes to foreign VAT rates
Requesting a foreign VAT refund is fraught with challenges. It begins with making sure that all the employees in your company have entered the VAT information for their expenses into your expense software correctly. Additionally, there’s no standard formatting for foreign VAT receipts, so you’ll have to put in time and energy working out exactly how much VAT was paid and what it was paid for, so that you can verify that all the VAT was paid correctly. On top of that, all too many VAT receipts are likely to be torn, stained, crumpled, or all the above – making deciphering them a challenge in and of itself.
But just to make VAT reclaim even harder, foreign VAT rates don’t stay the same forever. If your company’s employees are involved in a lot of business travel, it’s very likely that a number of VAT rates have changed just during the past financial year. It’s vital for you to keep on top of all changes to both standard and reduced foreign VAT rates, so that you can make sure that your VAT refund requests are always correct.
Changes to Foreign VAT Rates in 2019
During 2019, several countries approved changes to their VAT rates. Sometimes, these are changes that apply across the board to all items, but some countries have adjusted VAT rates only on certain items, making it even more complicated to keep track of the correct rates for your VAT refund. Here are some of the main foreign VAT rate changes that you need to know.
The Czech Republic has introduced a number of new VAT rates, but just to keep you on your toes, they only apply to some items. These items have been reduced from the standard rate of 21% to the new reduced rate of 10%:
- Repairs or changes to clothing, footwear, and other leather goods
- Repairs and maintenance of bicycles
- Any services provided by hairdressers and barbers
For these items, the reduced VAT rate has changed from 15% to 10%:
- Catering and soft drinks services
In Hungary, the government has agreed to reduce VAT on hotel rooms, Airbnb-style short-term accommodation, and Bed and Breakfast accommodation from 18% to 5%, beginning in 2020.
Greece has seen not just one, but two waves of changes to foreign VAT rates during 2019, many of which are likely to affect business travellers. First of all, in May 2019, VAT rates were reduced from 24% to 13% for many food and drink services like catering services, bakeries, cafes, and restaurants. Unfortunately, VAT charged on coffee served in any of these places is remaining at 24%.
In July 2019, the government announced another set of changes. Standard VAT rates will drop from 24% to 22% across the board over the next two years, and the reduced rate will decrease from 13% to 11% as well. The Greek government also announced an exemption on VAT for all construction services over a 3 year period.
During 2019, China introduced a number of changes to their VAT regulations. Among the most notable are:
- Standard VAT rates were reduced from 16% to 13%, and reduced VAT rates dropped from 10% to 9%.
- Business travellers in certain industries can reduce their VAT rates by an extra 10%, based on deductible input VAT, for:
- Accommodation services
- Travel and entertainment
- Postal and telecommunications
- IT services
- Sporting, cultural, and creative services
In Slovakia, the foreign VAT rate on hotel rooms and other similar short-term accommodation dropped to 10%.
Although most of the changes to VAT rates have been reductions, it’s important to note that a few countries have raised VAT rates on some items. Most notably, Ireland has raised VAT on tourism services to 13.5%.
Similarly, in the Netherlands the reduced VAT rate has been raised to 9% on all relevant items.\
In Russia, the standard VAT rate increased, from 18% to 20%, and the reduced VAT rate also rose, from 15.25% to 16.67%
Changes to foreign VAT rates make it even harder to complete your foreign VAT refund request correctly, but you can simplify it when you use the right tools. For all you need to know about filing foreign and local VAT reclaim in the EU and other countries around the world, download our eBook.