If your firm does a lot of international business or travel, you might be overlooking a hidden treasure. When you spend money overseas, a Value Added Tax (VAT) may be imposed that averages 19 percent, but can reach 25 percent in some countries.
In some cases, you can also pay a VAT on products that your company imports for resale. VAT is a general consumption tax based on the price of goods and services. It is imposed on products at each stage of production and the amount is proportionate to the value added at that stage. In the end, the final price is the sum of the values added.
Every consumer -- domestic and foreign -- pays the consumption tax. And foreign consumers are entitled to refunds. Getting the money back can be complicated, however, so here are three hints to help:
Collect your paperwork. Claiming a refund requires proper documentation and an application form, often in a foreign language. Each country has its own laws and requirements, so be sure your employees keep all receipts and get the proper forms when they make their purchases.
U.S. firms pay $1 billion in VAT each year yet claim only 20 percent of that in allowable refunds. Consult your tax adviser to help you reclaim your piece of this hidden treasure.
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