GCC Indirect Tax Weekly Digest

Deloitte releases the 2018 European VAT Refund Guide

In general, businesses incurring VAT on costs in European countries in which they are not VAT-registered (non-resident businesses) can incur significant amounts of local VAT without a clear route to recover these costs. GCC businesses may be unaware that in some cases, there could be an opportunity to submit claims for a refund of the VAT paid by those businesses on costs incurred in Europe.

In order to claim a refund, many European countries require that the business is established in a jurisdiction which also has a VAT system or a similar turnover tax (e.g. GST). As a result, many GCC businesses which previously had been ineligible to submit refund claims may now be able to submit refund requests. Whilst it is not yet clear whether, by the time claims are filed, individual EU countries will consider the UAE or KSA as having fully implemented reciprocal refund arrangements (another condition for refund in many EU countries), businesses are recommended to start considering the value of VAT incurred now as this may represent a significant opportunity to reduce tax costs.

Some common examples for which non-resident businesses incur VAT include:

• Employee travel and lodging;
• Service charges from vendors;
• Co-location costs;
• Import VAT incurred on the movement of goods across borders;
• Clinical trials; and
• Local purchases of goods.

Deloitte has released the 2018 European VAT Refund Guide which covers the rules and procedures in the 28 EU member states and 3 of the European Free Trade Association (EFTA) countries: Iceland, Norway and Switzerland to obtain a VAT refund.

This digest is for information purposes only and should not be construed as advice. It does not necessarily cover every aspect of the topics with which it deals. You should not act upon the contents of this alert without receiving formal advice on your particular circumstances.