The 5 Oddest Things for Which Countries Will Give a Reduced VAT
When your employees set off on business travel, you know that they’ll encounter many travel expenses. A VAT reclaim reimburses the VAT on the goods and services purchased by your employees while they travel, and those reimbursements can add up, helping your bottom line.
Countries which charge VAT intend it to serve as a local tax. That means that business travel visitors, or businesses which make cross-border transactions with local companies, can use the VAT refund mechanisms to get the VAT back.
It can be challenging to complete the VAT reclaim process correctly, even if you’re dealing with a local VAT refund. When you have to cope with a foreign VAT reclaim, it gets even harder. You need to organise VAT receipts that are written in different languages and use different currencies. The formatting for VAT tax receipts varies between countries, making it challenging to understand the breakdown of taxes.
Reduced VAT rates
What’s more, many countries have more than one VAT rate. There’s a standard VAT rate, which is the one you’re most familiar with, but also one or more reduced VAT tax bands that could trip you up if you’re not prepared for them.
Sometimes the reduced VAT rate only applies to very specific situations that aren’t likely to affect business travellers. For example, the UK’s reduced VAT rate of 5% applies only to social housing and services, electricity, children’s car seats, and a few other items.
But other countries charge reduced rates on items that are relevant to your employees, like entertainment, food, or newspapers.
When you fill out a VAT return for a VAT refund on your employees’ latest business trip, you might not be expecting changes in the VAT rates, and could end up accidentally filling in the wrong amounts. This is especially likely if employees travel to the same country frequently, so you’ve got used to filling in VAT reclaim forms with certain numbers. Make sure to keep a lookout for unexpected reduced VAT rates so that you don’t make a mistake in your calculations, and potentially miss out on a VAT claim refund opportunity.
Here are 5 of the oddest things for which countries give a reduced VAT rate, so that you can feel prepared for the unexpected.
If your employees have to visit the hair salon in Poland to prepare for a meeting, they’ll only be charged 8% VAT on their appointment, instead of the very high standard rate of 23%.
In a number of countries, your employees will pay a reduced VAT rate for certain types of entertainment. In Hungary, the reduced VAT tax rate is 18% instead of 27% for some open-air concerts; in Germany and Belgium, most admission to cultural services like the theatre or the cinema has a reduced rate of 6% and 7% respectively, instead of 19% and 21%.
If your employees are on a business trip in Luxemburg and have to get a bicycle fixed, they’ll only pay 8% VAT on the repair, instead of the standard 17%. And in the Netherlands, repairs to clothing, shoes, or leather goods comes with a VAT tax rate of 9% instead of 21%.
4. Use of sporting facilities
It’s possible that employees on a business trip will pay to use the local gym, swimming pool, or athletics track during their visit. If that happens in Finland or Romania, they’ll be charged a reduced VAT rate of 10% instead of 24% in Finland, and 5% instead of 19% in Romania.
5. Artificial insemination services for animals
It’s hard to imagine a scenario where your employees might be in Ireland and need to pay for artificial insemination services for animals or the sale of livestock semen, but if it should occur, it’s useful to know that VAT will be charged at 13.5% instead of 23%.
Different VAT rates make your foreign VAT return even more complicated, but you can make it easier 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.