In the recent world of digitalisation and globalisation, imports and exports have become very popular. The emergence of e-commerce websites has exponentially increased the imports and exports of goods from one country to another.
But along with the ease, this creates complexity when it comes to taxes, especially VAT. Many online buyers are unaware of the process of reclaiming VAT on EU purchases. So in this blog, we’ll explore how to reclaim VAT on EU purchases.
Let’s have a look.
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Reclaiming VAT on EU purchases after 1st January 2021
If you’re charged VAT on purchases from an EU member state, you need to reclaim it from the tax authority of that particular country. These are the common ways to reclaim VAT:
- the EU VAT refund system
- the 13th Directive process
The EU VAT Refund System
This system can be used to reclaim VAT paid to an EU member state if your business is based in Northern Ireland and you:
- supply goods from or in Northern Ireland
- Make acquisitions of goods using EU intra-community
If you’re eligible to use this system but don’t have access to the system, you can contact HMRC for guidance.
What can be Reclaimed using the EU VAT Refund System?
After meeting all the conditions, this system can be used to reclaim VAT on invoices only for goods. Bear in mind that VAT cannot be reclaimed on:
- purchases of services
- invoices used for both goods and services
How to Claim A Refund using the EU VAT Refund System?
After the end of the transition period, the UK and Isle of Man can still reclaim the VAT from the EU. However, the process will be the same as claiming back VAT from a non-EU business.
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The VAT-registered businesses in the UK need to send an electronic refund claim to their tax authorities (HMRC). Then the HMRC will forward it to the EU country from where the claimant is willing to reclaim VAT. Here’s the summary for reclaiming VAT from an EU country.
For more information, you can visit the European Commission website.
There is another way to reclaim VAT on EU purchases: the 13th Directive Process.
Reclaiming VAT from the EU via the 13th Directive Process
In case you are unable to reclaim VAT by the EU VAT refund system, the EU 13th Directive process can be used.
For detailed information, you can visit here for claiming VAT using the 13th Directive Process.
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The Bottom Line
In conclusion, reclaiming VAT on EU purchases can be a valuable way for UK businesses to save on costs, especially when making frequent purchases from EU suppliers. By following the correct steps, keeping detailed records, and ensuring all claims are accurate, businesses can make the process smooth and straightforward.
Understanding the reclaim process can help businesses stay compliant with tax rules while also maximizing their cash flow. If you’re unsure about any part of reclaiming VAT on EU purchases, consulting with a tax professional can be a smart step to ensure everything is done correctly.
Disclaimer: All the information provided in this article on Reclaiming VAT on EU purchases, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.
