Are you owed money?
Understanding how VAT refunds operate, and identifying if you are eligible, improves cash flow and reduces unnecessary expenses.
There are two main types of VAT refunds:
- Refunds for businesses already VAT-registered in a country
- Refunds for non-VAT registered businesses, also known as 8th/13th Directive claims in the EU
Knowing which category applies to your business can make the difference between leaving money on the table or boosting your bottom line.
- VAT refunds for VAT-registered businesses
If your business is VAT-registered in a country, you can deduct input VAT (ie the VAT you pay on business-related purchases, such as office supplies, rent, or professional services) from your output VAT, which is the VAT you collect from customers.
How it works: When you file a VAT return, input VAT is offset against output VAT. If you’ve paid more than collected, the tax authority refunds the difference. In some countries, the refunds will be processed automatically after submitting the returns, while in others, you will need to select the refund option in your VAT return, or the credit will be carried forward to the next one. In both cases, the tax authorities will request additional information to support the input VAT claim (eg purchase invoices) or launch a tax audit, before a refund is paid.
Why this matters: Cash flow is critical. Businesses that frequently have high expenses or significant exports can greatly benefit from timely VAT refunds. Delays or missed filings can lead to lost refunds, so keeping up with deadlines and proper documentation is essential.
- VAT refunds for non-VAT registered businesses (8th/13th Directive claims)
Even if your business isn’t registered for VAT in the country where costs are incurred, you may still be eligible for a VAT refund under EU VAT refund schemes:
- 8th Directive: Refunds for EU-established businesses that are not VAT-registered in the EU country where the expenses were incurred.13th Directive: Refunds for Non-EU businesses that are not VAT-registered in the EU country where the expenses were incurred.
Eligible expenses include:
- trade fair participation
- hotel and catering services
- local purchases
Challenges: Each EU country has its own rules, deadlines and documentation requirements. Some countries are stricter than others, and reciprocity agreements may affect eligibility.
Examples across Europe:
- Germany: VAT-registered businesses claim refunds via their regular VAT returns, while non-registered businesses must submit claims electronically by the official deadline. Authorities are strict and missing the deadline can result in lost refunds.
- Italy: Italy allows VAT refunds to non-EU businesses from countries with which it has a reciprocity agreement (Israel, Norway and Switzerland). Businesses from these countries can reclaim VAT on purchases made in Italy, provided they meet the necessary conditions
- Non-EU businesses from countries with which it has no reciprocity agreement can also claim refunds under the 13th Directive procedure; however, they must appoint a fiscal representative in Italy to handle the refund process.
- Spain: VAT-registered businesses can claim refunds through their regular VAT returns, which can be monthly, quarterly, or annually. Non-EU businesses not VAT-registered in Spain can claim a VAT refund under the 13th Directive. They must appoint a fiscal representative and submit supporting documents, such as invoices and proof of business.
Why VAT refunds matter
VAT refunds aren’t trivial. Companies attending trade shows, investing in local infrastructure or incurring substantial business expenses can recover tens of thousands of euros annually. Even individuals, such as self-employed consultants, may benefit. It’s worth identifying if you are eligible for a VAT refund, so that you aren’t giving money away.
How to approach VAT refunds:
- Identify your category: VAT-registered or not
- Map eligible expenses
- Check filing deadlines
- Prepare accurate documentation
- Seek expert help if needed rules vary by country and can be complex
Remember…
For CEOs and business owners, reclaiming VAT is a straightforward way to strengthen cash flow and reduce costs. Maximising VAT refunds isn’t just about compliance; it’s about improving your company’s financial health. Remember to review your VAT position and ensure you’re not leaving money on the table.
Download our guide to learn more : VAT Refund – Brochure