➢ VAT abroad, how businesses can RECOVER IT
Foreign input VAT can be recovered under certain circumstances. This article tells you in which cases and what the refund process is.
You have been abroad for a few days visiting some clients, what will happen to the VAT on the invoices you have received?
Is it possible to claim a refund, or will you no longer be able to recover it?
Your company is starting to sell abroad, so you and your employees have already planned a series of trips to trade fairs and to visit customers.
Can you recover VAT on invoices received abroad?
What steps do you need to take?
In general, it is possible to recover the differential amount of VAT abroad.
How can I recover VAT abroad?
First of all, it should be borne in mind that this procedure is primarily intended for business transactions. This is not a minor issue, as the rates of Value Added Tax (VAT) vary from state to state.
In addition, VAT outside Spain cannot be offset and differences cannot be applied if you are outside the European Union. When this happens, the only option for not giving up this sum is to recover the VAT.
In other words;
You can recover the VAT incurred in another EU country in the same proportion as it would have been deductible if it had been incurred in Spain.
Recovery of foreign vat within the EU
If your company is not registered as an intra-Community trader ROI and you receive invoices issued in an EU country (with VAT from that country), you can apply for a VAT refund.
However, you can only obtain a refund to the extent that the tax would have been deductible if it had been paid in Spain.
For example, a hotel bill, car rental or entrance to a trade fair are business-related expenses, so input VAT is deductible.
But make no mistake: you should not include the VAT incurred abroad in the quarterly tax returns you file with the Spanish tax authorities (form 303), as only Spanish VAT should be included on this form.
You will have to file form 360:
This return must be filed electronically from the Spanish tax authorities’ website. From there, the Spanish tax authorities will process the refund with the authorities in the country where you incurred the expense.
On form 360 you must indicate the details of the supplier (name, address and VAT number) and the details of the invoice (date, taxable base, VAT amount and description of the expense).
Attention! If the taxable amount is more than 1,000 euros (or 250 if it is fuel), you must attach a copy of the invoice.
Recovery of foreign VAT outside the EU
If the expenditure was incurred in a non-EU country, you can recover VAT if Spain has signed a reciprocal treatment agreement with that country (currently Canada, Israel, Japan, Monaco, Switzerland and Norway).
However, you should check the content of the agreement to see what type of invoices qualify for this refund. In addition, you will have to apply to the tax authorities of that country.
If the invoice was issued in a non-EU country without a reciprocity agreement, and the amount of VAT is substantial, consult your adviser. The domestic rules of that country may provide for a refund mechanism.
If not, do not be alarmed. The expense incurred and the VAT not recovered will be at least one more deductible expense for corporate tax purposes.
How to apply for a VAT refund abroad?
If so, form 360 must be submitted to the Tax Agency in application form so that they can deal with the country that generated the input VAT.
Refunds can be made in quarterly applications if the amount to be refunded is at least 400 euros. Otherwise, a single annual application must be made, with a minimum amount to be claimed of at least 50 euros. In addition:
If your company has borne VAT in different countries, you must submit a separate application for each country.
The deadline for claiming the refund is 30 September of the year following the year of the invoice.
Another central issue is that you have to keep all documentation of the purchase. This means the original invoices and any proof of payment you have, physical or computerised.
In some cases, you also have to prove the necessity of the expense and that it is indeed important for the company.
The deadline for VAT refunds abroad will depend on each case and its complexity. However, at present, it usually takes between 4 and 8 months because, on occasions, more information may be requested to corroborate the refund.
In any case, a commercial company making investments and purchases in a reciprocity country should be aware of this issue. Not surprisingly, the percentage that can be recovered from the investment is sufficiently high.
Example of how to recover vat from abroad
Input VAT in the EU
If in 2023 your company sent an employee to work in another EU country or to a trade fair in the EU, it is very likely that he or she would incur expenses for which he or she would incur VAT from that country, for example:
Hotels, car hire, meeting room hire, etc.
Expenses for access to trade fairs attended in order to publicise the company’s products and to inquire about those of the competition.
Purchase of goods abroad that are not subsequently transported out of the country in which they were purchased, etc.
Claiming a VAT refund abroad
As the VAT is input VAT incurred in another country, your company cannot deduct it in its regular VAT returns (form 303).
To recover the tax, you must apply for a refund using form 360 (which must be filed online, together with a copy of the invoices justifying the input VAT).
From there, the Spanish tax authorities communicate the request to the country where the VAT was paid so that it can manage the refund.
The minimum amount of input VAT to be claimed in each return filed (form 360) is established by each country.
However, it can never be less than 400 euros (for quarterly applications) or 50 euros (for annual applications) [Directive 2008/9/EC, art. 17].
Deductible foreign VAT
Your company will be able to recover such VAT provided that it would have been deductible if it had been incurred in Spain (i.e. it must originate from the development of business activities).
If your business is on a pro-rata basis and you can only deduct a percentage of the input VAT, you can also claim back part of the VAT on a pro-rata basis (you must state this percentage on the VAT return) [Directive 2008/9/EC, Art. 6].
Deadlines for claiming foreign VAT refunds
You must submit a refund application (form 360) for each country where you have borne VAT, and in respect of quarterly or annual periods. The deadline for submission begins after the end of the quarter or year to which the application refers and ends on 30 September of the following year.
Get advice so you don't lose money
VAT abroad can be recovered in some cases, and if your company operates with a country that has a reciprocity agreement with Spain, you should take advantage of this.
At Asesoría Orihuela Costa we specialise in providing answers to companies, SMEs and the self-employed. Ask for information!
