Rethink your Expense Management processes: VAT\GST included

March 23, 2022

Many employee expense management systems (“EMS”) are great at ensuring employees are reimbursed for expenses they lay out on behalf of their employers.  Many of these EMS are less good at identifying the VAT\GST that may be recoverable and is included in the expense.

While this may seem trivial, potentially lost VAT\GST can amount to a substantial sum of money. Given the fact that the average rate of VAT\GST in the European Union (“EU”) is over 20%, your business could be losing out on VAT\GST refunds over for relatively modest levels of VAT\GST expenses.

At the same time claiming VAT\GST is not easy for several reasons.  Firstly, the rules of VAT\GST recovery are easy and can vary depending on the expense.  For example, in many but not all EU countries VAT\GST incurred on a meal in a restaurant on a business trip may be recoverable – but not if a client is present at the meal.  Perhaps an even bigger challenge is the fact that VAT\GST incurred in another EU country cannot be recovered on your normal VAT\GST filings.

One of the big issues of an EMS is that you are dependent on employees to provide the necessary information to be able to determine whether VAT\GST is recoverable.  Employees are not generally versed in the intricacies of VAT\GST law and often have little interest in ensuring that their employer is able to recover the VAT\GST on their expense claim.

Even businesses using an automated EMS find themselves having to manually input the VAT\GST component of expenses.  Since the amounts of VAT\GST are often small, it is often not worthwhile seeking to recover these amounts.  An additional problem is that human errors are likely to arise when accounts payable staff key in the information.

An additional problem is that businesses often live in fear of the tax authorities and try and ‘play it safe’ and use this as an excuse for not recovering VAT\GST.  The reality is that most tax authorities take the view that if a business has a credible accounting system which can recover the VAT\GST it is entitled to, it demonstrates that the VAT\GST accounting function is robust and can be relied on.

Many of the issues surrounding VAT\GST recovery simply fall away by using spending cards and in particular the The Smart Spend Debit Mastercard®has a number of unique features.  The The Smart Spend Debit Mastercard® has been designed to focus on dealing with employee expenses and VAT\GST recovery together. The integrated VAT\GST reclaim solution for businesses is key to this and ensures that  businesses do not simply ‘lose’ VAT\GST when they reimburse employee expenses.

An important component of the The Smart Spend Debit Mastercard®is the emphasis it places on detecting VAT\GST incurred on employee expenses and determining how this VAT\GST can be recovered, while at the same time maintaining the audit trail required by your accounting team to support accurate reporting requirements and being able to produce evidence required in the case of tax authority audits.

The flexibility and versatility of the spending card as well as the software which underpins its use means that the spending card can be used for virtually any business expense. The need for an employer to maintain control and have visibility are an important component of the spending card.  The spending card is particularly well suited for employee expenses and travel expenses where employees have flexibility to book their own trips.  The spending card can be used for almost any purchase where employees have devolved authority to deal with their own purchases such as for subscriptions and other business relevant expenses.

The powerful and unique WAY2VAT proprietary software captures each and every expense efficiently and with ease.  Because the software is so flexible it can handle the end-to-end process from initial capture of purchase order or invoice right until to payment.  The software identifies all the key information needed by your accounting system or ERP and it interfaces with your Accounts Payable function to make the process painless and easy.  A particular strength is the ability to carve out the VAT\GST element shown on invoices.  This is particularly useful if your business operates in a number of jurisdictions where different VAT\GST rates apply and different rules for VAT\GST recovery apply. For example, in most countries VAT\GST on business entertainment is blocked.  There are some countries which allow such VAT\GST to be recovered.  The WAY2VAT software will assist businesses in recovery of VAT\GST for those countries which allow VAT\GST on business entertainment to be recovered.

Recording, authorising and tracking employee expenses can often prove challenging even for businesses with well-run Accounts Payable and Human Resources teams.  The spending card software allows employees to upload expenses and receipts using their smartphones and allows employees to allocate the expense with a few clicks after which an authorisation process can be provided by the solution.  Any business with employees which incurs business expenses will find this feature extremely useful because it cuts down on significant staff time involved in authorising and posting expenses.  In addition, the VAT\GST identification mechanism means that your business can recover trapped or lost VAT\GST.

The spending card software can be used as an expense management system or can replace your current system given its flexibility and ability to integrate within accounting systems.  Like many similar systems the software simplifies the employee expense reimbursement process by automating much of it. The software reduces the need for paper, lowers the amount of time spent handling expenses and minimises errors. The reporting function can also provide multiple report categories such as by vendor name, expense category, date range, employee allowance, spend frequency as well as other criteria.

As part of the WAY2VATsuite of products, the spending card fully integrates with WAY2VAT’s fully automated VAT\GST reclaim solution.  Using the spending card for overseas purchases allows businesses to benefit from WAY2VAT’s patented technology-based solution allowing businesses to recover VAT\GST incurred by their employees in up to 40 countries across the globe.  When employees upload their expenses, the software will identify the VAT\GST element and the jurisdiction.  This can then be used as a basis for starting an overseas VAT\GST reclaim.  This results in a simple hassle-free VAT\GST/GST reclaim solution for your business.  Each time an expense is incurred the relevant information is fed into the software.  In addition, a VAT\GST receipt or invoice can be uploaded by the employee. The information is immediately available in order to commence overseas VAT\GST claims or to provide tax authorities with information required at the press of a button.


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