Best Practices for VAT Reclaim and Cash Flow Management During Economic Uncertainty
In these difficult and uncertain times, businesses around the globe are looking internally at how to best prepare for the weeks and months ahead of us and what needs to be done to adapt to our current situation.
SAP Concur have worked closely with our partners, VAT IT, to compile some helpful advice around the latest European VAT rules for business’ and some tips for managing cash flow though expense and invoice management processes.
Data
The most effective first step in being able to effectively manage cash flow and improve VAT reclaim is compiling your data. What has been spent? Where has it been spent? Is it VAT reclaimable, what proof do we need to reclaim the available VAT? This is often easier said than done but is essential in enabling your business to have actionable insights based off the whole picture rather than just a small sub-section. Data is the most powerful asset available to you, and if you can centralise data from both expenses and invoices into a single silo you may find decisions are more easily made.
Cash Flow
Now more than ever, liquidity is so important in keeping businesses and individuals everywhere able to continue to operate. Efficiency in processing is the key to keep things moving along the lines, outstanding invoices incur additional costs and employees left out of pocket from overdue expenses fosters a culture of mistrust and can cause negative attitudes towards employers. At a time when costs and trust have never been more important, ensuring these areas are seen to will be mutually beneficial for employers, employees and suppliers alike.
VAT Reclaim
Hardly a new concept to most, but an opportunity that is not always maximised on both foreign and domestic spend. Different tax jurisdictions have different rules on what is reclaimable, and the rates at which VAT is charged. It can be a complex task to keep on top of multiple different rules and deadlines across multiple regions, but the benefits of doing is the money coming back into the business to ensure funds are available to keep processes running smoothly.
VAT Update
The VAT IT team have been in contact with the different Tax Authority offices and gathered all the relevant information on current disruptions and how this will affect their processing times. This will ultimately affect the timeframe of VAT refunds to businesses.
Even more important, are the measures that are being taken to ease the compliance burden on businesses who may themselves not be able to submit returns and documents before relevant deadlines. Governments are also taking steps reduce the VAT amount on certain expenses which too can boost the cash position of a business.
We have compiled a quick high-level list of the biggest steps taken by countries and any adjusted timeframes in dealing with VAT submissions and reclaims:
UK: Those businesses unable to meet deferred import duty and import VAT payments on 15 April can apply to defer those payments.
Import VAT and duties waived on certain goods: Goods arriving from outside the EU will not be subject to customs duty or import VAT. These goods are vital medical equipment including ventilators, coronavirus testing kits and protective clothing.
Making Tax Digital Phase 2 postponed to 2021: In light of Covid-19, HMRC has decided to delay MTD phase II that was set to be launched on April 1 2020. Phase 2 will now commence April 2021.
All VAT payments are postponed for the next three months until the end of June 2020. The VAT not paid during the period is then due to be paid by the end of the 2020/21 financial year, which ends on 31 March 2021. There was no mention of interest charges on any deferred VAT. However, it can be assumed that this will not be imposed. There are no allowances for businesses on special schemes, such as the annual VAT payment. Returns must still be filed on time.
Austria, Finland & Portugal: An application process for waiving late charges on VAT settlements to be introduced.
Denmark: Once month delay of VAT payments for companies with turnover exceeding DKK50m.
France: Suspension of tax payments due in March 2020 for businesses in financial difficulties which must be applied for. Corporate and Payroll tax deferments, but no changes to the VAT payment timelines. It has been announced that there will be a VAT exemption for donations to healthcare establishments due to Coronavirus.
Germany: Allowing the application for delayed VAT payment to December 2020 (and some other taxes). No VAT on donations on medical supplies. The 2019 annual VAT deadline has been postponed to May 2020.
Greece: Four-month extension to pay VAT on amounts due at the end of April to August 2020.
Ireland: Removing late penalty and interest fines on VAT payments for small and medium sized businesses related to their March and April 2020 payments. Returns will still need to be filed on time. A VAT exemption on the domestic supply of Personal Protective Equipment has been announced.
Italy: Suspension of payments for large businesses until 31 March and 30 June for small businesses. Payments will resume in June, but can be made in 5 instalments.
Netherlands: Taxpayers in difficulties may apply for a VAT payment holiday in order to defer payment. Entrepreneurs who provide medical devices free of charge to healthcare institutions, care institutions and general practitioners do not have to pay VAT on this and have no consequences for the deduction of VAT.
Spain: Closure of tax offices from 15 March for face-to-face meetings. There is a suspension of filing deadlines as well. There will also be relief for small businesses on application. There will be no relief however for businesses with turnover greater than €6m turnover or if the VAT due is above €30m. Import VAT and customs duties six-month deferments are possible for amounts between €100 and €30,000
Sweden: Removing late penalty and interest fines on VAT payments for up to one year.
These measures are sure to change constantly, and the VAT IT team are receiving updates daily about these countries, as well as others across the globe, and will continue to provide updates as and when necessary.