In the case of business to business transactions/transfers, the customer is also another VAT payer. The implication of VAT for B2B transactions changes based on the usage of the goods by the customers i.e.; the business.
If the VAT paying business acquires services or buys products for private purposes, then normal taxation rules apply.
If he is using the services with a commercial benefit in mind the realm of B2B VAT emerges and the business is charged accordingly.
For international transactions, local rules always play an important role.
Business to Business VAT Reclaim Processes:
VAT reclaim is still a difficult process for more information about making efficient business to business VAT reclaim.
Here are some of the ways to ensure that some of your B2B spendings can be reclaimed:
1. Deal with customers who are locals of the country you ship your product
This is of high importance. In order to levy the correct tax and to apply for tax reclaims it is important the client is established in the country where your services are physically provided. This will greatly enhance the chances of the business to business vat reclaims.
If you are dealing with a foreign client, the foreign government might also look into your location before quoting VAT.
This has its benefits and shortcomings, for example, if you happen to be in an EU country and are providing your services in another EU country, chances are that you will able to file for VAT reclaims more effectively.
2. VAT registration as Reverse charge
The reverse charge helps VAT paying a business to reclaim the amount you paid as tax for dealing with a foreign client. If you are at the receiving end of a service from a foreign provider, some governments will actually register VAT as a reverse charge.
This means the VAT is added to the value of the service and is not present as a separate amount which will be on behalf of the overseas supplier.
Depending on the nature of your business, you can then recover the entire VAT amount as input tax. The end result is that the business will have no net VAT cost.
3. File for VAT reclaims in the shortest time possible
Most of the countries now have online portals which will help in applying reclaims. If you don’t want to avoid delays, apply with your invoices to these portals as soon as possible.
4. Use VAT reclaims software or platform
The most effective way to recover your business to business vat is to use VAT reclaim software. If you are a company which deals with a lot of international clients this will be very beneficial. VAT reclaims software’s simply the processes with fewer human inputs required.
They rely on automation and provide timely reports. You need not spend any money on application filing as the software will do it for you.
This will also enhance the speed of the actual process and it also complies with every rule and regulation in a foreign country.
Which is the best business to business vat software?
When selecting the B2B VAT software, look for ones that require less human effort and are able to automatically input and process applications. Select solutions that provide their services in every country you do business in as well.
VAT reclaims can help you get back some of the annual spendings, use a VAT reclaim software to make your recovery process faster and smoother.