VAT IT has signed a global partnership with
MasterCard, whose data represents a breakthrough for the notoriously cumbersome
recovery of foreign VAT, according to the value-added tax specialist. VAT
recovery typically is manual, but VAT Cloud can use an automated feed from clients'
MasterCard reports to evaluate for VAT yield, the total amount of VAT a company
can reclaim. The card data also becomes the basis of claims forwarded to foreign
tax offices, furnishing such details as supplier name, address and registered VAT
number, as well as total amount spent.
Following a pilot with an Asia/Pacific-based client, VAT
Cloud covers claims in 24 Asia/Pacific countries initially. VAT IT has not yet
provided a timetable for the rest of the global rollout.
"MasterCard has the data we need to make claims
and understand the full potential for what there is to recover," said VAT
IT U.K. managing director Greg Magid, who leads the MasterCard partnership.
"The key fields we need to populate the claims are included in the
MasterCard data." Philip Glickman, MasterCard head of commercial products
and solutions for Asia/Pacific, said, "The seamless automated process also
provides a paperless and fully digital trail, such that you can trace every
step of the process down to granular detail."
Card data can be insufficient to assess the correct
recovery amount for payments, especially hotel bills, if they lack line
itemization. This is not a problem in countries where VAT applies uniformly to
all items on a hotel invoice, but in some countries, VAT may apply differently
to the room rate and dining charges or VAT may be charged on dining but not recoverable.
However, the biggest barrier to full automation of
foreign VAT recovery is the requirement to submit receipts. In recent years,
scanned receipts have become acceptable, and VAT IT partnered with expense
management companies like Concur in 2014 and Certify and Xpenditure in 2015. These partnerships allow travelers
to photograph invoices with their phones, and VAT Cloud uses optical character recognition
and algorithms to match the receipts to MasterCard data while also completing
empty data fields in the claims, Magid said.
As with the MasterCard arrangement, this data can be
used to prepare spreadsheets indicating potential VAT yield for each line item and
to act as the basis for claims. Inevitably, however, the accuracy will not be
as good as for a direct card feed.
All but the United States and a handful of countries,
mainly in the Middle East, charge VAT. KPMG has estimated that VAT accounts for
5 percent of the average bill for a foreign business trip. The Organisation for
Economic Co-operation and Development estimated that half of companies recover
only 50 percent or less of the foreign VAT they incur. Magid said VAT IT
recovered VAT on 577,038 hotel invoices and 269,392 restaurant bills in 2015. Like
its competitors, the company earns revenue by taking a percentage of the VAT it
recovers.
Other companies also have added automation to the
process. Taxeo, for example, feeds electronic invoices from hotels into recovery
claims.
VAT IT is considering other ideas that could
take automation further, such as linking to dining payment apps like Velocity,
which is also a Concur partner, that could transmit a restaurant bill into a
VAT report. The company is tripling its IT budget this year, but Magid tempered
expectations, noting, "A completely paperless environment is not yet
legally possible."
Correction Feb. 18, 2016: A previous version of this article erroneously stated that VAT IT was in partnership negotiations with Chrome River.