The importance of Value Added Tax (VAT) and Excise Duty (ED) refunds in businesses that work on a cross-border basis is well known, especially for the commercial entities working within the European Union. These refunds can significantly lower the costs of cross-border transactions, facilitating financial optimization. However, tax refunds can be a very complicated process. They include many complicated bureaucratic protocols as well as country-specific tax regulations. This guide is designed to demystify the many intricacies of VAT and ED refunds. It provides businesses with the knowledge and resources required to manage this critical component of global trade.
What is VAT?
VAT is consumption tax assessed on the value added. It is collected from the goods and services at each point in the production or distribution chain. VAT is paid by businesses, particularly in the transport industry, for costs such as fuel cost, road taxes, spare parts and also parking charges. In the European Union, VAT is levied on these services, and it falls upon the final consumer.
What is a VAT refund?
Understanding how to get VAT refund is extremely important for companies so they can recover VAT paid in an EU country where they don’t usually trade or are located. This scenario is very typical in international business deals. VAT is the tax paid when a business firm from one country buys goods or services in another EU Member State. These businesses, regardless of whether they are situated within the EU or outside it, may be refunded for VAT paid. They need to fulfil some conditions as laid down by the EU country in which the VAT was paid.
What is an ED?
The Excise Duty (ED) is an indirect tax charged on the purchase or consumption of specific products, including fuel, tobacco, and alcohol. The money from these taxes stays in the country where they are paid. This tax is usually a flat rate per unit of the product.
What is an ED refund?
An Excise Duty (ED) refund means that the companies may recover some Excise taxes imposed on particular types of products produced in the EU member states. Such commodities include fuel, alcohol and also tobacco. For example, in the transport sector, the Excise duties on professional diesel are partially reimbursed for certain EU countries.
Navigating the labyrinth of VAT (Value Added Tax) and ED (Excise Duty) refund processes is daunting. It requires an in-depth understanding of varied and intricate tax laws across different countries. This complexity is compounded by stringent bureaucratic requirements. The necessity for detailed documentation often makes the process quite formidable. It requires a deep knowledge of procedural nuances. This includes adhering to specific deadlines and complying with various legal stipulations.
Businesses looking to reclaim VAT must meticulously gather a range of documents, such as invoices and cash receipts. Then, they must submit these to the appropriate tax authorities. EU-based businesses must submit their claims to their national tax authorities. The national tax authorities then forward these to the tax authorities of the country where the VAT was incurred. Non-EU-based businesses must submit their applications directly to the tax authorities of the country where they paid the VAT. This process ensures that businesses operating across EU borders are not subjected to double taxation. It also ensures that their international activities do not put them at a financial disadvantage.
Claiming refunds for Excise Duty is equally complex and demanding. Businesses must meticulously compile and submit comprehensive documentation. They must do so in accordance with the specific legal and procedural requirements of each EU country involved. The aim is to facilitate operational cost reduction and effective cash flow management. However, given the intricate nature of these processes, it can be a significant administrative burden.
Companies have the option of managing the VAT and ED refund claims by themselves. But, hiring agents dedicated to these specific details is much easier and more cost-effective. In this regard, companies such as Eurowag are very crucial. They provide their professional services to address all the administrative issues in a refund process as well as to increase communication effectiveness between claimants and Foreign State Authorities. Thus, delegating these tasks to a competent agent can help businesses reduce the procedure considerably. The agents simply require the relevant tax refund papers from the businesses, such as purchase invoices and cash receipts. This delegation allows for compliance with all the required provisions. It also simplifies the process, giving businesses an opportunity to concentrate on their mainstream operations without being caught up with complicated tax reimbursement procedures.
In order to receive such refunds, businesses need to provide the appropriate documents, including invoices and cash receipts. Eurowag provides VAT refunds in Europe for more than 28 countries and also ED refund services for 7 countries. It offers a complete management procedure for tax refund services. It verifies every invoice, including those from third parties, and handles all communication with the relevant tax bodies.
Countries where you can claim VAT refunds with Eurowag: Romania (RO), Slovakia (SK), Czech Republic (CZ), France (FR), Spain (ES), Belgium (BE), Hungary (HU - only for foreign established companies!), Italy (IT), Slovenia (SI), Poland (PL), Austria (AT), Bulgaria (BG), Germany (DE), Denmark (DK), Estonia (EE), Finland (FI), Great Britain (GB), Croatia (HR), Greece (GR), Ireland (IE), Lithuania (LT), Luxembourg (LU), Latvia (LV), Netherlands (NL), Cyprus (CY), Malta (MT), Portugal (PT), Sweden (SE), and Norway (NO).
Countries where you can claim ED refunds of professional diesel with Eurowag: Hungary (HU- only for foreign established companies!), France (FR), Belgium (BE), Croatia (HR), Italy (IT), Slovenia (SI), and Spain (ES).
Eurowag constantly reviews VAT refund legislation for all EU members and neighbouring 3rd countries and constantly develops its list of available countries.
VAT refunds are usually very complicated, and this makes businesses question how long does VAT refund takes. In the next section, we will discuss this issue.
To get a VAT refund in Europe, including an EU VAT refund, businesses typically need to file a refund claim with their own country's tax authority or directly with the tax authority of the EU country where the VAT was paid. The process of how to get a VAT refund involves submitting necessary documentation, such as invoices and proof of VAT paid. The duration for a VAT refund typically ranges from 2 to 8 months. But in some cases, this period can extend beyond 24 months. For ED refunds, the waiting time can often be even longer, with the standard processing time exceeding the usual duration for VAT refunds.
Advancements in technology now allow businesses to manage their VAT refund online, simplifying the submission process. When it comes to VAT refunds, claimants have a couple of options.
Eurowag provides highly bespoke financing solutions for VAT refunds. The most common option is the FAST Net Invoicing. Eurowag also provides many customised FLEXI solutions to fit various business needs. Such options provide the clients with very flexible repayment periods. They also have an option to set specific limits that suit their own financial conditions and demands.
Businesses must fill out an Excise Duty refund application form to claim an Excise Duty refund. For the refunds of Excise Duty, users have a choice between the Standard Procedure option (Customs process and send refund) or the Advanced Payment of Excise Duty (APED) option. When opting for the Advanced Payment option, businesses effectively expedite their claim for tax refunds, streamlining how to claim tax refunds for their Excise duties. The APED provides financing immediately after the successful submission of the refund claim. This offer is valid for all the countries where Eurowag service works, excluding Italy. APED is particularly beneficial for businesses that require quick access to funds and cannot afford to wait for lengthy standard processing times.
Q. How does the tax refund work?
A. When a taxpayer has paid in excess of the amount owed, they will receive tax refunds. This applies to the companies that accrue VAT and ED on their foreign business expenses.
Q. How does a tax refund function generally?
A. When a taxpayer has paid the taxes abroad, they receive that refundable tax amount as refunds. This is typical for businesses that have VAT and ED costs abroad.
Q. What is the difference between VAT and Excise Duty?
A. VAT is a consumption tax on goods and services, whereas Excise Duty is a tax on specific products like fuel and alcohol.
Q. How to get tax refunds in the context of VAT and ED?
A. Businesses need to submit a detailed refund application to get a tax refund in the context of paid VAT and ED. They must submit relevant fiscal documents and other supporting documentation to the appropriate State tax authorities of the country where the taxes were paid, or they can opt for the services of a specialized agency like Eurowag, which can claim tax refunds on their behalf. For Excise Duty rates in different EU countries, click here.
VAT and Excise Duty refund claims are very complicated and also laborious to understand. However, companies can see their way through this landscape much more smoothly with services such as those provided by Eurowag. Eurowag's tax refund services offer an automated and hassle-free process. This guarantees prompt and effective processing of VAT refunds as well as ED with a full overview via the Eurowag portal.
