Perhaps you’re already aware – or perhaps not – but fact is, that in a lot of businesses, large amounts in foreign value added tax, that isn’t reclaimed, is just lying about throughout the organization. And who’s okay with just letting money lie on the floor, if I may ask? As a VAT registered business, you’re entitled to reclaim foreign VAT, and it’s a topic that I know is on the radar with many CFOs and Finance Managers. Most of them are in fact aware that it involves money, that’ll directly impact the bottom line. So why do we still see so many businesses that doesn’t bring these money home? And what does it take to get hold of the money? I’ll provide a few insights into this topic here.
TL;DRResearch estimates that businesses worldwide leave almost 20 billion euros in unclaimed foreign VAT on the table every year, largely because the reclaim process is complex and time-consuming. Acubiz argues that VAT-registered companies can recover this money with the right digital tooling, turning a cumbersome compliance task into a measurable boost to the bottom line.
The main reason for not reclaiming the foreign VAT, that a business might have paid in various contexts, is simply that it’s a complex and cumbersome process to deal with. The process will quickly become confusing and time-consuming, which is why many organizations omit to spend time dealing with it. The result is that huge amounts of money will stay with the tax authorities in the different countries. And they’ll keep the money safe and sound – or will they?
Especially the fact that the VAT often must be reclaimed from multiple countries has an implication on the complexity of the process. The procedures and rules are typically different from country to country. This means different application requirements, documentation requirements, control processes, deadlines and follow-up procedures. All this stuff makes it a hard job to get the money back.
Research within the area shows that almost 20 billion euro is left unclaimed across the world every year. In other words, that’s the total amount that businesses hold off from reclaiming. To put that figure into perspective, it costs around 24 billion euro a year to the keep the Danish healthcare system running. We’re talking a lot of money here!
Even though most finance people have this topic on their radar, then some might think that their share of the 20 billion euro is so vanishingly small, that it isn’t worth the trouble. Obviously, the potential for a given business correlates with its size and it’s amount of international activity. However, remember that if this cash is collected, it goes straight to the bottom line.
VAT refund can be obtained for many types of costs that your business might have abroad. A large part of these costs is related to the expenses that occurs in connection with business travelling. We’re talking about accommodation, food, car rental, domestic transport etc. Especially if your business has international activity and employees with frequent business travel, I’ll guarantee you, that the potential is there.
Now I’ve explained a bit about how cumbersome the process of recovering VAT is if you have to do it yourself. The good news, though, is that you can actually get that money back without all the hassle. It simply requires the right tools and the right partners:
Find and implement a digital expense management system.
Make sure that the solution has functionality to handle foreign VAT refund.
The costs, where foreign VAT reclaim is applicable, can, with great advantages, be handled in a digital expense management tool. One of the advantages is that the documentation needed towards the respective tax authorities becomes readily available. The leading expense management providers can then automatically share this information with a service provider, who’ll manage the whole reclaiming process.
At Acubiz, so far this year, we’ve managed to send back more than 400.000 euros to our customers. If you’re keen to dive deeper in this subject, you can head over to our knowledge bank and get our e-book – The ultimate guide to foreign VAT recovery for businesses.
Make sure, that you get your money back!
Frequently Asked Questions
How much foreign VAT goes unclaimed globally each year?
Research shows that approximately 20 billion euros in foreign VAT is left unclaimed worldwide every year. To put that in perspective, running the entire Danish healthcare system costs around 24 billion euros annually. This represents a significant missed financial opportunity for businesses that operate internationally.
Why do so many businesses fail to reclaim foreign VAT?
The process is genuinely complex and time-consuming. Different countries have different application requirements, documentation standards, deadlines, and follow-up procedures. When expenses span multiple countries, the administrative burden multiplies, and many finance teams simply deprioritize it.
Which companies are eligible to reclaim foreign VAT?
Any VAT-registered business that has paid VAT in a foreign country in connection with business activities is potentially entitled to reclaim it. This commonly includes travel expenses, meals, accommodation, and other costs incurred by employees on business trips abroad.
How can digital expense management tools help with foreign VAT recovery?
Digital tools that capture receipt data at the point of expense can automatically flag VAT amounts and collect the documentation required for reclaim applications. This removes the need for manual receipt reviews and form submissions, making the recovery process practical enough to actually execute.
Does unclaimed foreign VAT directly affect the company's bottom line?
Yes, directly. Foreign VAT that is not reclaimed is simply money that stays with the tax authority in the relevant country. Recovering it has no associated revenue target, it is pure recovery of funds already spent. This makes VAT reclaim one of the clearest ROI cases in finance process optimization.