VAT recovery

Completed

To earn refunds on value-added tax (VAT) purchases, a company or entity must recognize, collect, verify, and apply the correct information. This process requires several activities that might require numerous workers or positions, depending on the company's scale.

To recover VAT by using expense control, the following prerequisites must be fulfilled:

  • Tax codes must be created for countries/regions that are allocated to expense categories.
  • A sales tax group must be created for each tax code.
  • An item sales tax code must be created for each sales tax group.

After meeting the prerequisites, employees need to follow specific procedures to apply for VAT transaction refunds:

  1. On an expense report, enter tax information about credit card transactions to identify eligible VAT refunds.

  2. Make sure that all tax information is complete and then post the expense report.

    • For example, Contoso's Accounts Payable Coordinator must enter tax details that are omitted from an expense report before the report is released. They open the page details of the expense report and see an employee’s approved expense report. The Accounts Payable Coordinator opens the expense report to view transaction data and notices that the employee never entered an item sales tax group on one of the transactions. Because the details are not provided, the Coordinator can't post the expense report; therefore, they look at the Expense Management Tax configuration page and search for the necessary item sales tax group for the country/region and transaction type. The Accounts Payable Coordinator posts the expense report to the general ledger.
    • A VAT-recoverable job item is generated when the Accounts Payable Coordinator publishes the expense report. This item is delegated to an administrative processing team member. The Coordinator receives notification that acknowledges successful posting and displays the number of VAT transactions that are listed for recovery.
  3. Process expenses that are eligible for international VAT recovery.

    A member of Contoso’s administrative processing team is responsible for confirming that all necessary details for recovering VAT are in the expense reports. They open the Expense tax recovery page and select the employee’s expense report. Then, the processor verifies that all receipts are attached and that the relevant sales tax group and item tax codes have been entered. When collecting the employee’s paper receipts, the processor reviews paper receipts against digital receipts and then updates the status of the expense report to Ready for recovery.

  4. Send VAT recovery data to another vendor to file international recovery returns.

    When a member of Contoso’s administrative processing team is ready to transfer details on the expense report to the other provider, who files returns on VAT recovery, they open the Expense tax recovery page. The processor filters the page to display only expense reports that are labeled as Ready for recovery. The expense reports' VAT details are exported to a Microsoft Excel worksheet. The processor then submits this worksheet to another distributor, with a note indicating that the paper receipts were delivered by courier.

  5. Process expenses for domestic VAT recovery.

    The Contoso administrative processor must then verify that the expense report transactions are eligible for VAT recovery. For VAT recovery, receipts must be in the name of the company. After the processor has verified that the receipts are in the company's name, they can file the return with the appropriate tax authority. In this case, the appropriate tax authority in the US is the Internal Revenue Service (IRS).