VAT Refund for Car Rentals & Fueling Expenses in the EU

During business trips throughout the year in Europe, you may have noticed how much of the costs are surrounding transport. Perhaps a lot of these costs are to rent a car, to make travelling around as fast and comfortable as possible. As with such huge expenses, typically VAT refunds can be requested for operational business costs for things such as car rental, fuel costs and even other associated costs like parking or repairs – but not everywhere in the EU can the VAT for these goods and services be recovered…

VAT reclaim deductibility of car rentals and fuel can vastly differ subject to locale, depending on which country is hosting your business trip. A hypothetical of how reclaiming VAT from identical purchases in different countries can be confusing; in Germany both fuel and car rental is fully deductible to the extent of business use. In the UK VAT on fuel is recoverable for business use, while VAT on car rental is only partly recoverable.

In France, VAT on car rental is generally non-refundable, while VAT on fuel is partly reclaimable for business use.

Due to the sheer scale of the EU, the number of countries with differing tax legislations and fluctuating possibilities of VAT reclaims, it is important to know what you can and can’t claim for depending on where you have been.

Renting Cars, refilling your Gas Tank and VAT reclaim – how does it work?

An example of how differing Tax deductions can affect you upon preparation for reclaim – you are a company from Dublin, two of your employees visit Berlin, one goes to London, another two visit Brussels, two are off to Valetta in Malta and the final colleague of your employees visits Athens. All needed rental vehicles and obviously had to fuel them. Your employees returned and kept their car rental invoices and petrol top up receipts and at the end of the year you began to prepare claims…

During your claim period, you were able to recover all VAT from these expenses in Germany, in Belgium you were only able to claim back 50% of the VAT from both car and fuel. In Greece, VAT on passenger-car hire, fuel and related costs is generally not deductible, and in Malta, VAT on fuel and hiring of means of transport is normally not refundable.

The car rental in France was deductible in this case however the fuel was not, and in the UK you recovered VAT from your fuel expenses however only partially for car rental.

A major confusion reclaiming for car rental and fuel costs is the grey area in some countries of VAT being partly recoverable, dependent on established compliancy rules. For example, if a particular journey was directly a business expense or not. In some regions there are even differentiators for fuel, so petrol might be VAT deductible, whereas diesel may not be.

A common issue we experience at VAT4U facing Clients wishing to reclaim on car rental and fuel expenses is that more frequently than not documents received are not VAT compliant documents.

‘Rental Agreements’ and ‘Rental Summaries’  for cars alone are not accepted by Tax Administrations for recovering VAT.  Proof of payment receipts for petrol and fuels are also not accepted. You need the final VAT invoice from the rental company.

Tips & Tricks – things you need to know…

Claiming back VAT on your car rentals & fuel may seem complicated due to the differing compliancy and deductibility rules in different EU countries, but it really doesn’t have to be. There are a few simple steps you can take to make the VAT recovery process on car rentals, fuels, associated costs and other transportation expenses as smooth as possible and get a refund from your business VAT outlays – that’s where VAT4U can help…

• Preparation: Familiarize yourself with what you can and can’t claim for, depending on which countries you have been gathering expenses. If you are claiming for your car rental invoices, perhaps you also have the fuel receipts and parking charges from filling up your tank that you can also include in your claim.
• Compliance: On the topic of compliance and processes around VAT reclaim, planning an appropriate compliant document acquisition system early makes the process seemingly smooth, ensuring your employees obtain compliant documents is the most helpful step, especially as some rental documents supplied can sometimes be non-compliant for claiming VAT refunds. VAT4U assists further with this by monitoring over 2000 compliance rules in over 28 countries, so you don’t have to!
• Auditing: assorting all your acquired documents in a sufficient audit process, so that you can find all required invoices when you are ready, means you can prepare your claim as fast and efficiently as possible – perhaps categorize your expenses for easier data management later.
• Country Awareness: Understand the basic principles of VAT reclaim in the countries you wish to claim in.
• Get Refunded: Upload all of your car rental & fueling expenses that you wish to claim for to VAT4U, follow the necessary steps and get your VAT refunded!