VAT reclaim: Actionable ideas for travel


VALUE-ADDED TAX, OR VAT, is a type of consumption tax that is present in more than 150 countries and accounts for up to a fifth of total global tax revenue.1


For companies


that incur VAT on foreign spending, VAT tax is a deeply embedded cost of doing business.


But finance and travel managers


By Melissa Gargagliano Head of EMEA commercial cards, Bank of America Merrill Lynch


are transforming this expense into an opportunity, since VAT – unlike other tax types – can entitle businesses to reclaims. According to VAT IT, a leading VAT reclaim specialist, a company with a $10 million annual international travel programme can reclaim between $1 million and $1.5 million each year on average.1


Yet many travel


managers are unable to fully capitalise on these sums. Approximately 72% of the businesses surveyed by the Organisation for Economic Co-operation and Development found reclaim procedures difficult to navigate, and 20% were unable to recover any VAT expenses at all.1


Industry estimates


suggest a staggering $20 billion in annual spend is left unclaimed.1


NAVIGATING COMPLEXITIES TO UNCOVER OPPORTUNITIES A wave of new solutions is empowering businesses to reclaim a greater share of their international spending. Finance staff are using these solutions to boost their companies’ finances, save costs, and free up resources typically devoted to time-consuming manual processes.


Realizing these benefits may require a shift in focus. European travel managers often focus on VAT associated with domestic air travel, which usually constitutes less than 1% of total reclaimable value. International accommodation and travel can be a far greater opportunity, since this category typically makes up roughly 70% of T&E spending.2 But different regulations in various jurisdictions can complicate efforts to reclaim VAT spending in this category. For example, France doesn’t allow reclaims on public


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