International Programs: A Guide to Value-Added Taxes

With meeting and incentive travel being a core competency at FUSION, it is important to have an understanding of the “ins and outs” of value-added tax (VAT)– the surcharge levied on various goods and services in more than 140 countries.  With no universal standards for VAT, it is important to utilize a company with the knowledge and resources to cost-effectively manage an international meetings and incentive programs.

Below is a list of information to clarify some of these complicated VAT rules.

1)     Each country has its own VAT rate and its own set of rules – different countries have different rates for meeting components as well as which event-related goods and services are eligible for rebates (typically, this includes hotels, food and beverage, venue rental and audiovisual rentals) and certain types of meetings warrant a refund (an incentive vs. a sales meeting).

2)     Having the right resources – meeting and incentive planners have endless resources to local convention & visitor bureaus, national tourism offices and destination management companies, which will have current VAT rates and regulations for their destination.

3)     Determine if U.S. firms realize rebates – the first thing to look at for VAT rebates is whether the destination offers any rebates to a U.S. firm.  Most European destinations do, but not all (including Italy and Spain), and almost every country outside Europe does not allow U.S. firms to recover the tax (including the Caribbean, Central and South America, China, India and Singapore).

4)     Don’t rely on historical rates or nearby countries – there are vast differences in VAT rates from country to country.   France’s VAT on hotel rooms is 5.5%, while the United Kingdom charges a whopping 20%!  Both countries offer rebates, but the upfront payment is much steeper for the U.K.

5)     Know the difficulty for security rebates – some countries (Australia, Japan and South Korea) offer limited rebates on very specific types of meetings, but require complex documentation.

6)     VAT in Mexico and Canada – Mexico stopped levying VAT in 2005 and instead waives that amount, rather than charging the tax and rebating it, but pure incentive programs do not count in this policy.  Canadian VAT – known as goods and services tax (GST) –rebates are difficult for U.S. events to qualify for.  Canada has a provincial sales tax of 7-8% in addition to its GST, which can be reclaimed in certain provinces (including Quebec).

7)     Types of events affecting VAT rebates – the type of event can affect whether your firm is eligible for a rebate.  For example, Ireland will rebate most costs for trade shows or sales meetings, but not for incentive programs.  Countries that do allow incentive program refunds include Denmark, Finland, France, Germany, Iceland, Malta, Monaco, Netherlands, Norway and the U.K.

8)     Collect the proper paperwork – it’s extremely important to keep all receipts, invoices and documentation for the event and to obtain the required filing forms.  Ideally, you want VAT listed as a separate line-item on all invoices.  All charges and paperwork should be filed under the same name to ease the process.

9)     Deadlines are critical – U.S. businesses must submit their VAT recovery application within six months after the year ends, with some exceptions (the U.K. operates on a fiscal year-July to July).

Reference: Grimaldi, Lisa A.  “A Guide to Value-Added Taxes.”  Meetings & Conventions, November 1, 2011.  www.meetings-conventions.com.