VAT incurred on international business travel is, in many cases, recoverable. When employees travel abroad and incur VAT on hotels, restaurants, transport or other expenses, the company is generally entitled to recover that VAT from the relevant tax authority.
This represents real cash for the company, and it is important to secure it. Yet across organisations with frequent cross-border travel, a significant share of this VAT is never reclaimed. Not because it is not eligible, but because the process to recover it is complex and involves multiple systems and stakeholders.
In this first episode, Damien discusses the two main challenges that prevent companies from capturing the foreign VAT they are entitled to, and how the right technology helps recover it.
Why foreign VAT on business travel is recoverable cash
When a company has employees travelling abroad, the VAT they pay on expenses in those countries is generally recoverable. A Spanish company whose employees travel to Germany or France, for example, can recover the VAT paid in those countries.
For multinational organisations with significant cross-border travel, the amounts involved are not negligible. The VAT incurred on hotels, restaurants, transport, conferences and accommodation across multiple jurisdictions adds up to a meaningful cash position over the course of a year.
In practice, much of this VAT is never reclaimed. The reason is not that the rules prevent recovery, but that the process to capture it requires the right combination of stakeholders, systems and rules to work together. Two main challenges explain why this combination often falls short.
The two main challenges that limit VAT recovery on travel expenses
In a recent conversation with Amadeus Cytric, our Managing Director Damien Moras outlined the two main challenges that affect VAT management on travel expenses across organisations.
1. The number of touchpoints in the lifecycle of a travel expense
A travel expense moves through several steps: the booking of the trip, the payment to the vendor, the expense report, the accounting entry and the VAT claim. The more steps a travel expense involves, the more opportunities there are to make a mistake or to lose VAT-relevant information along the way.
By the time the expense reaches the finance team for processing, the document may be incomplete, the data may be inconsistent, or the right information for VAT treatment may not be there.
2. Multiple stakeholders involved in the travel expense process
VAT recovery on travel is not the responsibility of a single function. The traveller incurs the expense, the vendor issues the invoice, finance processes it, tax owns the recovery, procurement influences which suppliers are used, and IT runs the systems through which all of this flows.
Each stakeholder has a different role and different priorities. The more stakeholders involved, the more complexity there can be in the travel expense process, and the more friction this creates in the VAT treatment of those expenses.
How technology helps connect the steps and capture more VAT
One of the most effective ways to address both challenges is to leverage technology to better interconnect the steps in the travel expense lifecycle. When the systems involved in the process exchange data cleanly, the gaps that lead to VAT being lost are reduced.
This is where specialised technology earns its place. A travel and expense platform such as Amadeus Cytric manages the travel expense lifecycle. Connected to a specialised VAT engine such as VAT4U, the VAT-relevant data captured at each step flows through to the recovery process consistently, without manual reconstruction. The integration reduces the gaps between the steps and gives the process a stronger structure from end to end.
The same approach applies to the multi-stakeholder challenge. When the systems used by the traveller, finance, tax, procurement and IT are connected through a shared VAT engine, the stakeholders work from the same data and the friction between them is reduced.
Capturing foreign VAT on business travel in practice
Foreign VAT on business travel is a real cash opportunity for organisations with cross-border activity. The two challenges that limit recovery, the number of touchpoints in the lifecycle of a travel expense and the number of stakeholders involved, are well understood. The answer is to leverage technology to interconnect the steps in the travel expense lifecycle. When VAT-relevant data flows cleanly from one stage to the next, the gaps that cause VAT to be lost are reduced.
When the systems involved in travel and expenses are properly connected, the gaps that cause VAT to slip through close, and the cash that is technically recoverable becomes the cash that is actually recovered.
Capture the foreign VAT your business travel is generating
See how VAT4U and Amadeus Cytric work together to turn travel expenses into recoverable VAT, end to end.
Discover VAT4U for Amadeus CytricFrequently asked questions
VAT incurred on international business travel is, in many cases, recoverable. When employees of a company travel abroad and pay VAT on local expenses such as hotels, restaurants or transport, the company is generally entitled to reclaim that VAT, subject to the rules of the country where the VAT was paid.
Two challenges affect VAT management on travel expenses in most organisations. The first is the number of touchpoints in the lifecycle of a travel expense (booking, payment to the vendor, expense report, accounting and VAT claim), each of which is a point where VAT-relevant data can be lost. The second is the number of stakeholders involved (traveller, vendors, finance, tax, procurement and IT), each with different roles and priorities, which creates friction in the VAT processing.
Yes. Even if travel expense invoices and receipts look small or less important compared with traditional supplier invoices, they need to respect the same compliance rules as any other invoice in the relevant jurisdiction. This is essential to ensure the VAT can be recovered.
Leveraging technology to interconnect the steps of the travel expense lifecycle is one of the most effective ways to capture more VAT. A travel and expense platform connected to a specialised VAT engine ensures that VAT-relevant data flows consistently from booking to claim, reducing the gaps where VAT is typically lost.
Amadeus Cytric manages the travel and expense process, while VAT4U focuses on VAT management. Integrating the two allows VAT-relevant data to flow from the travel and expense platform into the VAT engine, where it is validated against country-specific rules and prepared for recovery. This reduces the gaps between the steps and helps secure the VAT that is recoverable.
