As an international-exhibiting newbie, I don't understand value-added tax, and I'm afraid that my inexperience will cost me, or rather, my program. What is VAT and what are some key things I need to know about it?
A value-added tax (VAT), or goods and services tax (GST), is simply a type of consumption tariff, i.e., a duty on the purchase of goods and services. Exhibitors entering a foreign country with various goods often have to pay this VAT on the items they're bringing into the country - sometimes up to 20 percent of their value. However, in many instances, you can apply for a refund (also known as a claim) to recoup the tax after the show.
For exhibitors, VAT can amount to hundreds or thousands of dollars, and getting a refund is critical to the ROI
of their programs. Many exhibitors hire a firm that specializes in VAT recovery, such as TTM International LLC,
Taxback.com, or VAT Consulting Group Inc. Typically, you submit the original invoices and required paperwork to one of these firms following your show, and it will file the documents to receive the refund for you. Charges required for such services vary by firm and the extent of the claim.
Whether you hire a refund service or your company handles VAT-related issues on its own, you still need a basic understanding of the VAT system to ensure you're not paying more than you have to. Here are four critical things to keep in mind regarding this tricky little tax. While this information doesn't explain every nuance of this tax system, it will help you avoid major issues and make sure you're not paying more VAT than necessary.
Plan ahead, and save receipts,
invoices, and payment proof. Getting
VAT refunds, especially from countries within the European Union (EU),
often hinges on whether or not you submit the original invoices. You might also need to provide proof of payment, such as a cancelled check or wire-transfer copy. Exhibitors or VAT-refund agencies typically submit this paperwork either immediately following a show or as soon as you return to the office. Be aware of which documents you need to submit and ensure you have a system for tracking
receipts and proof of payment in place before you leave on your trip. Going into a show with a VAT-recovery
process in place will help make recouping the tax faster and easier post
show. What's more, after submitting the claim, it can take up to two years before the money is refunded. If you've forgotten to include a receipt or invoice, there's little chance you'll be able to track it down months after the initial submission.
Be prepared to provide pre-show paperwork and/or obtain third-party assistance. In Japan, for example, you need to apply for VAT refunds prior to the show. Some countries require that you have a fiscal representative with a bank account to facilitate your VAT refund. The process for obtaining a refund isn't terribly cumbersome, but it's important to do your homework before the show. A VAT-refund agency can provide a wealth of info and often has bank accounts and local reps in various countries to meet this requirement, but always explore these country-specific regulations before the show.
Know your deadlines. For most countries, you are required to submit
your paperwork for the previous calendar year by June 30. In other words, all your 2011 VAT-refund
paperwork needs to be submitted
by June 30, 2012. However, the VAT-refund calendar in the United Kingdom is July through June, with the refund deadline being Dec. 31. In Japan, documentation must be submitted within two months of your company's fiscal year end. As you can see, there are several variables regarding deadlines, so it's critical to read through the documents pertaining to your specific situation and to go into the show with a VAT-refund timeline in mind.
Determine if you are eligible for an ATA Carnet. You can secure an ATA Carnet (a special kind of international customs and export/import document)
to expedite your shipment's trip through customs and alleviate VAT for exhibit and equipment shipments. An ATA Carnet, which is accepted in 70 countries, can be renewed and is valid for six months, during which time your shipment can enter and exit countries multiple times. Once the Carnet is created, however, your shipment must remain exactly the same as documented; nothing can be added or removed. Thus, you can't include items distributed at shows, such as literature, consumables, or giveaways, in a Carnet. The cost
of the ATA Carnet is based on the declared value of the shipment.
Securing a VAT refund is a good way to put money back in your
exhibiting budget. The only trick is
that you need to have the knowledge, or the professional refund experts, necessary to properly assemble the correct documentation and file a claim for your refund on time.
- Jeannine K. Swan, owner/president, Global Exhibit Management, Fort Worth, TX