News and Insights

European Union VAT Recovery Deadline is Approaching

Tax Development Mar 15, 2012

June 30, 2012 is an important date for taxpayers who may be eligible to recover value-added tax (VAT) paid to many European Union (EU) member countries. In many cases, VAT paid in 2011 may not be recoverable if the required documentation is not filed with the respective EU authority by this date.

VAT is collected in all EU countries. Quite often, Canadian and U.S. companies doing business in the EU are required to pay local VAT charges. VAT is usually charged on purchases and costs incurred locally within an EU country. This applies not only to commercial goods for further distribution but also to hotel costs and other travel expenses, as well as certain services. Furthermore, VAT is normally charged on imports from nonmember countries.

In many EU countries, taxpayers may generally recover the VAT charged on purchases and costs related to their businesses, even if they are not registered for VAT in a particular country as a foreign taxpayer. However, certain restrictions may lead to unrecoverable VAT, including whether a reciprocity agreement is required, the nature of the business, and the nature of the costs.

The deadline in most EU countries for a VAT reclaim for 2011 is set for June 30, 2012. For this reason, taxpayers with potential EU VAT claims should take action quickly. In many EU countries, missing this deadline could lead to unrecoverable VAT. Please note, however, that in some EU countries, it is possible to recover VAT as far back as five years.