How much VAT do you pay on your coffee?
If you’re processing VAT reclaim for your company, you know what it feels like to deal with hundreds of business travel VAT receipts, each one for a small amount. Although you might deal with some receipts for weird and wonderful business expenses when requesting a VAT refund, the chances are good that the vast majority of them are for coffee.
No one, it seems, drinks as much coffee as a business traveler with an expense account. At some point all the VAT receipts can blur together, until it feels like every other receipt is for a cup of coffee, somewhere else in the world. It’s no wonder that you feel tempted to sweep all those coffee VAT receipts off the desk and into the bin, and just process receipts for larger amounts which seem more deserving of your time. Those small foreign VAT receipts for one or two cups of coffee at a time are probably partly responsible for the £16 billion of refundable VAT that goes unclaimed every year.
With all the time that you spend requesting a foreign VAT refund for coffee, have you ever wondered how much VAT your company pays for coffee in different countries? It’s interesting to take a close look at foreign VAT rates on coffee, and see how much they vary.
Reduced rates for coffee
Some countries recognize that coffee is a vital foodstuff, so they apply reduced VAT rates to coffee. These include:
Italy, where the standard VAT rate of 22% is reduced to 10%
Czech Republic, which reduces the standard rate of 21% to 15% for coffee
Finland, where the high standard rate of 24% drops to 14%
The Netherlands, where the 21% standard rate is reduced to 9%
Romania, where the VAT rate for coffee is 5% instead of 19%
No VAT breaks for coffee
Sadly, there are also countries which don’t appear to realise how important coffee is, so they don’t give it any kind of VAT tax break. These include Greece, Denmark, and Slovenia.
Just to add insult to injury, some countries have a reduced VAT rate for other non-alcoholic drinks, but not for coffee. For example, Austria charges a reduced rate of 10% for non-alcoholic beverages like juice and hot cocoa, but that does not apply to coffee (or to tea, for that matter), which are charged at the standard rate of 20%. Similarly, in Poland the VAT for sandwiches and juice is charged at 9% in coffee shops and cafes, but the VAT for coffee is charged at 23%.
Varied VAT coffee rates
Just to keep things really confusing, there are a number of countries which apply different VAT rates to your employees’ cup of coffee, depending on the circumstances within which they are bought.
In France, people pay a VAT rate of 10% for coffee bought to drink in a coffee shop, restaurant, or cafe, but 5.5% if they buy it for takeaway.
Ireland charges 9% on coffee that’s sold as part of a meal in a restaurant, 13.5% on coffee sold through a vending machine, coffee shop, or convenience store, but 23% on coffee sold in a hotel.
In Cyprus, the VAT reduction is on coffee bought in a restaurant or cafe as part of a meal, when rates are 9%. Coffee drinkers who take their drink away with them have to pay 19% VAT. Just to add to the complexity, if someone buys coffee in a bar or club that doesn’t serve food, they’ll pay an even lower rate of 5% VAT.
Portugal has the most confusing VAT rates for coffee. If someone buys a drink to take away, they’ll pay the standard 23% VAT rate for coffee, but just 6% for juice. However, if they buy it to drink in a restaurant, bar, or nightclub, they’ll pay the standard rate for juice, and a reduced 13% rate for the coffee.
The varying foreign VAT rates charged for coffee in different countries, combined with the small amounts for each receipt, make it even more overwhelming to complete your foreign VAT reclaim correctly. With an automated VAT reclaim system, however, you can easily get a VAT refund for every cup, everywhere.
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.