Reclaiming value-added tax (VAT) across borders can be complicated for international businesses, as more than 170 countries use VAT. US businesses that operate abroad often have to pay foreign VAT, but many don’t reclaim it. This isn’t because they’re ineligible, but rather because the recovery process is fragmented, specific to each country, and easy to delay until the deadlines have passed.

Below, we’ll explore how reclaiming VAT works for US businesses, which expenses are recoverable, and how to avoid the documentation mistakes that kill claims before they’re processed.

Highlights

• US businesses can reclaim VAT paid on eligible overseas expenses such as travel, trade shows, and supplier invoices, but they must apply separately to each country’s tax authority.

• Deadlines are often strict and unforgiving, with EU countries typically requiring claims by June 30 of the year following when the expenses were incurred.

• The effort is most worthwhile for businesses with decent international spending, where recoverable VAT across multiple jurisdictions can add up to a substantial sum.

What is VAT reclaim?

Reclaiming VAT means recovering the VAT businesses have paid on business-related goods and services from tax authorities.

VAT is a consumption tax that’s applied at each stage of the supply chain from production to distribution. This differs from US sales tax, which is collected once at the point of sale. The rates vary considerably across the more than 170 countries that use VAT (e.g., 20% in the UK, 27% in Hungary).

How does reclaiming VAT work?

Each country runs its own VAT reclamation scheme for nonresident businesses, with specific forms, deadlines, documentation requirements, and minimum claim thresholds. Here’s what the general process looks like:

• Gather valid VAT invoices: Every claim needs a valid VAT invoice that shows the supplier’s VAT registration number, the VAT amount charged, and a description of the goods or services. Missing any of these fields typically invalidates the claim.

• Submit to each country separately: A German VAT claim goes to the Bundeszentralamt für Steuern, a UK VAT claim goes to His Majesty’s Revenue and Customs (HMRC), and a French VAT claim goes to the Direction générale des Finances publiques.

• Exceed the minimum thresholds: Some countries will set a minimum claim amount. Germany, for example, sets a requirement for a minimum annual claim of €250. Other countries set varying thresholds.

• Reclaim before the deadline: Many EU countries require claims by a specific date so check what that is for the countries where you’re doing business.

• Respond to queries promptly: Tax authorities might request additional documentation. You must respond within the required time window or the claim might be denied.

Why do US businesses pay foreign VAT?

US businesses that operate in other countries must comply with local VAT regulations.These are the categories where US businesses commonly accumulate foreign VAT:

• Business travel: Hotels, ground transportation, and domestic flights within VAT-charging countries all carry VAT.

• Trade shows and conferences: Booth fees, exhibition space, and event services are usually taxable.

• Overseas suppliers: If you’re buying goods or services from VAT-registered foreign businesses and they’re delivering to you locally rather than exporting, you’ll often pay VAT on those invoices.

• Equipment and materials: Purchasing or renting equipment abroad, or buying materials for a project in a foreign country, often triggers VAT.

• Professional services consumed locally: Legal fees, consulting, or other services engaged and delivered in a foreign country can carry local VAT.

Which expenses can US businesses reclaim foreign VAT on?

Eligibility varies by country, but the broad categories are consistent across most VAT regimes. The expense must have an obvious business purpose, and you need a valid VAT invoice for every line item you’re claiming.

Businesses can usually recover VAT on the following expenses:

• Hotel accommodations: Business travel lodging is recoverable in many jurisdictions, which makes it one of the most straightforward categories to reclaim.

• Ground transportation: Taxis, trains, and car rentals used for business purposes generally carry recoverable VAT.

• Trade show and exhibition fees: VAT paid on booth fees and exhibition space in Europe is typically recoverable. So it’s one of the higher-value categories for US businesses that operate internationally.

• Conference registration fees: Business conference fees typically carry VAT and are recoverable where a clear business purpose exists.

• Fuel: Fuel for rental vehicles used for business is recoverable in many jurisdictions, although personal use can complicate claims.

VAT is usually not recoverable on the following expenses:

• Client entertainment: VAT regimes often specifically block reclamation of costs from entertaining third parties.

• Personal expenses: Any personal expenditure that’s mixed into a business trip isn’t recoverable.

• Passenger vehicles: Jurisdictions often block VAT recovery on vehicle purchases, with narrow exceptions for businesses in the motor trade or vehicle hires.

How far back can US businesses reclaim foreign VAT?

Deadlines vary by country, but the standard window across many EU countries extends through the first six months of the year after the date VAT was incurred. Here’s a closer look:

• EU member states: These deadlines generally follow the calendar year basis, with slight differences between countries. That means VAT incurred between January 1 and December 31 of a given year must be claimed by June 30 next year.

• UK: HMRC’s deadline is June 30 following the calendar year when the expense was paid.

• Switzerland and Norway: Both run schemes outside the EU framework. While Switzerland has its own system, the deadline is also June 30. In Norway, refund applications for foreign businesses must be submitted by September 30 of the following year.

For businesses that haven’t been reclaiming at all, it’s worth checking whether any claims from the prior year are still within the window before writing off the historic amounts. Verify each country’s specific rules to do so.

What are the risks and common mistakes in reclaiming foreign VAT?

Companies that attempt to reclaim foreign VAT without specialist support tend to make the following errors:

• Submitting invalid or incomplete invoices: A foreign supplier’s invoice that omits their VAT registration number, shows the wrong entity name, or lacks a straightforward description of services will likely be rejected.

• Missing deadlines: Companies miss the deadline when they treat VAT reclaim as a year-end task rather than build it into their regular expense management processes. When someone finally gets to it in July, the prior year’s claims are ineligible.

• Making currency and threshold errors: Claims submitted in the wrong currency or that fall below the minimum threshold after conversion are generally rejected. If your total German VAT for the year is €245 and the minimum is €250, you can’t reclaim it.

• Assuming consistency across countries: The forms, documentation requirements, response timelines, and appeal processes differ around the world.

Is reclaiming foreign VAT worth the effort for your business?

The administrative cost of reclaiming foreign VAT is roughly fixed regardless of claim size, which makes the calculation straightforward.

A US company that sends employees to European trade shows, buys from German and Dutch suppliers, and runs a UK sales office might spend $2 million annually in VAT-charging countries, with $400,000 in VAT. At that scale, it’s worth building a process to reclaim VAT.

For a company with modest recoverable foreign VAT (e.g., $15,000) that runs the process in-house, it’s probably not worthwhile. Businesses can work with a reclaim agency to remove the up-front cost, but the agency will typically take a percentage of what it recovers. That trade-off might make sense for companies without the bandwidth to manage multijurisdiction submissions, but again, they should weigh the potential upside against the work involved.

How Stripe Tax can help

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