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How to Claim VAT: A Simple Guide

If you're a business owner or a frequent traveler, understanding how to claim VAT can save you money. Value-Added Tax (VAT) is a consumption tax added to the price of goods and services in many countries.

The good news is, with a little know-how, you can claim back the VAT you've paid on eligible purchases. In this simple guide, we'll walk you through the process of claiming VAT so you can put more money back in your pocket.

What is VAT and Who Can Claim It

VAT, or Value Added Tax, is a tax on products at each stage of the supply chain where value is added. Businesses add value through production and distribution. They can claim back the tax they pay on purchases related to their economic activities if they are VAT-registered. Meanwhile, individuals who are not registered for VAT can't claim it back. Businesses must be VAT-registered and the expenses must have been for business purposes to be eligible to claim VAT.

For individuals, specific requirements, like purchasing goods in another country and being a non-EU resident, apply.

Understanding VAT Claim Eligibility

Businesses and VAT

Businesses can claim Value Added Tax paid on goods and services used for their business activities. They can recover VAT by offsetting the amount they have paid on purchases against the amount they charge their customers.

To successfully claim VAT, businesses need to keep accurate records of all transactions related to the purchase and sale of goods and services. These records should include invoices, receipts, and other relevant documentation that prove the VAT paid.

Common mistakes to avoid when making a VAT claim include claiming VAT on non-deductible items, failing to keep proper records, and submitting claims with inaccuracies.

By maintaining organized and detailed records, businesses can ensure compliance with VAT regulations and maximize their VAT reclaims.

Individuals and VAT

Individuals who are not registered for VAT can get back the VAT they paid on eligible goods and services for business.

First, they need a VAT invoice from the supplier and should keep all VAT receipts. Then, they should track purchases, organize them, and submit the necessary documents to the tax authorities. It's important to keep detailed records and ensure that the VAT receipts have the supplier's VAT registration number and a description of the goods or services. Also, keeping a copy of the VAT invoice is crucial, as the tax authorities may ask to see them for verification. By following these steps and keeping accurate records, individuals can successfully claim back the VAT for their business activities.

The Steps to Make a VAT Claim

Get the Correct Forms

When filing a VAT claim, you need specific forms to be accurate and comply with regulations. To fill out the forms correctly, review the instructions and use resources provided by the tax authority or relevant entity. Consider seeking help from a tax professional for peace of mind and to ensure all necessary documentation is included.

When gathering documents for a VAT claim, it's important to keep detailed records of all transactions, invoices, and relevant paperwork. Organize these documents clearly to streamline the process and accurately fill out the required forms. By following these steps, you can confidently submit a VAT claim and maximize your chances of success.

Gather Necessary Documents

When making a VAT claim, gather necessary documents such as invoices, receipts, and proof of export. Businesses may need purchase orders and credit notes too.

Organize and store these documents in an easily accessible way, physically or digitally. Use a dedicated folder or online storage system, separated by month or quarter.

This makes retrieval smooth and efficient and ensures a smooth claim process. It also helps in future audits or inquiries.

Fill Out the Forms Properly

When filling out VAT claim forms, it's very important to carefully review all instructions and guidelines provided with the form. This can help individuals and businesses ensure they are doing so properly.

Double-checking all information and calculations is also important to avoid common mistakes such as inaccurate or missing data, as well as improper formatting.

To ensure proper completion of the VAT claim form, key information that should be included are the business or individual's name, address, tax identification number, and a detailed breakdown of the purchases for which the VAT refund is being requested.

It's also crucial to attach all necessary supporting documentation, such as original receipts and invoices. This will help in the proper completion of the claim form.

By taking the time to accurately fill out all required fields and double-checking for accuracy, individuals and businesses can avoid potential delays or rejections in the VAT refund process.

Submit Your Claim

Before submitting your VAT claim, gather all necessary documents like invoices and receipts. Fill out the required forms accurately. Include key information such as total VAT paid, claim period, and reason for the claim. Be aware of the submission deadlines and consequences of missing them. Missing deadlines may lead to rejected or delayed claims, resulting in a potential refund loss. Therefore, submit the claim well within the specified timeframe to avoid such issues.

Vat Claim Time Limits

Businesses typically have 3 to 4 years from the original VAT return to submit a claim. Individual claimants have up to 4 years to file a VAT claim with HM Revenue and Customs.

Not sticking to these time limits can lead to losing the right to a refund or adjustment, and may result in penalties and interest. This can negatively affect the financial position of the business or individual.

It's important for businesses and individuals to know and follow the VAT claim time limits to avoid financial losses and penalties.

Keep Records for VAT Claims

What Records to Keep

To make VAT claims, individuals and businesses need to keep records such as invoices, receipts, credit notes, and other documents showing the amount of VAT paid on purchases and charged on sales. It's also important to keep records of imported or exported goods or services. These records provide evidence to tax authorities and ensure accurate VAT claims.

As a general rule, records should be kept for at least six years, as tax authorities may request to inspect them within this timeframe. It's important for individuals and businesses to maintain these records to support their VAT claims with appropriate documentation and avoid potential penalties or tax compliance issues.

How Long to Keep Records

When it comes to keeping records for VAT claims, individuals and businesses should retain records for a minimum of 6 years. This includes invoices, receipts, and other relevant documentation that supports the VAT claim. Records of goods imported and exported, as well as all VAT receipts, should also be maintained.

There are time limits for making a VAT claim. Generally, individuals and businesses have 4 years from the time the goods were supplied or the services were performed to make a claim.

Keeping accurate and up-to-date records is crucial in the event of an audit or review by tax authorities. It's also a good practice for individuals and businesses to maintain thorough records beyond the minimum requirement. This provides an additional layer of protection in case of disputes or inquiries related to VAT claims.

Key Information to Include in Your VAT Claim

Business Information

VAT is a tax placed on a product when value is created at each stage of the supply chain. Businesses can claim VAT refunds when the VAT paid on purchases and expenses is more than the VAT received from sales.

To claim VAT, businesses should keep detailed records of all VAT transactions, provide necessary documentation, and submit the claim on time. This includes the business's VAT registration number, the amount of VAT being claimed, and supporting documents like invoices and receipts.

Following these steps helps businesses effectively claim VAT refunds and improve their financial position.

Details of Purchases

When preparing a VAT claim, you should include:

  • The date of purchase

  • Name and address of the supplier

  • Description of the goods or services

  • Cost of each item

  • Total amount paid

For instance, if a business buys office supplies, the VAT amount paid on those supplies should be in the claim. It's also important to keep records of these purchases for at least 6 years. Keep these records in a safe place for potential tax audits. By including all relevant purchase details in the VAT claim and keeping records for the required time, businesses can simplify the process and avoid potential issues.

VAT Amount

The total VAT amount being claimed is the sum of the input VAT paid on business expenses. This amount is then deducted from the output VAT collected on sales.

For example, a company may have paid $100 in VAT on various expenses and collected $150 in VAT on sales, resulting in a total VAT amount being claimed of $50.

To calculate the VAT amount for the claim, one would need to keep detailed records of all input and output VAT transactions. It's important to ensure that the correct VAT rates are applied.

In this particular situation, specific regulations and requirements for claiming VAT amount may vary depending on the country and type of business. Some countries may have a minimum threshold for VAT claims, and certain industries may have additional reporting or documentation requirements.

Remaining informed about the relevant tax laws and regulations is important to ensure compliance when claiming VAT amount.

What Happens After You Submit a VAT Claim

Review by Tax Authority

When the tax authority checks a VAT claim, they carefully look at all the supporting documents like invoices, receipts, and other paperwork. They do this to make sure the VAT claim follows the tax laws. If they find any problems, they might ask for more info or reject the claim. So, it's important for taxpayers to keep accurate records.

The tax authority might approve the VAT claim if everything's okay, and the taxpayer gets their refund or credit. But if there are mistakes, the authority might reject the claim and the taxpayer could face financial penalties.

To avoid problems, taxpayers should make sure their documents are complete and correct, consider exempt items, and not claim VAT for personal stuff. It's also important to keep organized records, stay updated on tax laws, and get help if needed.

Possible Outcomes of a Claim

After filing a VAT claim, there are different outcomes that could happen. One possibility is the approval of the claim, leading to the individual or business getting the requested refund.

Alternatively, the claim might be denied, leaving the claimant with some options to consider. If a VAT claim is denied, steps like reviewing the claim for accuracy and providing any missing documentation might be needed.

Moreover, appealing the decision or seeking professional help could also be options to explore.

To prevent common mistakes when making a VAT claim, individuals and businesses should make sure that all necessary documentation is accurately completed and submitted on time. Double-checking for accuracy and seeking professional advice can also help prevent potential issues in the claims process.

If Your Claim Is Denied

If your VAT claim is denied, it may be because of incomplete or inaccurate documentation, not meeting eligibility requirements, or missing deadlines.

To improve your chances of a successful claim, make sure all required documents are filled out correctly and submitted on time. It's also helpful to double-check the eligibility criteria for a VAT refund and consider seeking professional assistance.

Common mistakes to avoid when making a VAT claim are miscalculations, submitting duplicate claims, or lacking evidence to support the claim. If your claim is denied, consider appealing the decision, seeking clarification from tax authorities, or rectifying any errors in the initial claim.

Common VAT Claim Mistakes to Avoid

Missing Deadlines

Missing deadlines for VAT claims can have serious consequences for businesses. It can lead to potential refunds being lost, causing financial setbacks. Also, it can affect the eligibility of a VAT claim, possibly resulting in denial or delay. To prevent missing VAT claim deadlines, businesses can:

  • Use calendar reminders and automate the claims process.

  • Dedicate specific time for VAT-related tasks and periodically review the VAT claim process.

  • Seek professional assistance from tax consultants or accountants to stay on track with VAT claim deadlines.

Incorrect Information

Mistakes in VAT claims can come from:

  • Keeping inaccurate records

  • Not understanding regulations

  • Failing to update information

To avoid these mistakes:

  • Use good bookkeeping practices

  • Stay updated on tax regulations

  • Seek professional advice when unsure

Submitting a VAT claim with wrong information can lead to:

  • Penalties

  • Fines

  • Legal action

So, it's important to double-check all info before submitting to prevent financial and legal issues.

Not Keeping Proper Records

Not keeping proper records when making a VAT claim can have serious consequences. Accurate records of purchases, sales, and financial transactions are necessary to avoid errors in VAT returns. Without these records, businesses could face penalties, interest charges, and legal action from tax authorities.

In addition, not maintaining proper records can cause delays in processing VAT claims and lead to their rejection. For instance, businesses may struggle to reclaim VAT or meet tax obligations if they cannot provide evidence of VAT paid on expenses or accurately document input and output tax.

Proper record-keeping is crucial for successfully managing VAT claims and ensuring accuracy and transparency in