Question 1

What is VAT?

Accepted Answer

Value-added Tax (‘VAT’) is a consumption tax on goods and services. This is levied at each stage of the supply chain where value is added and included in the price paid by the end consumer. Businesses are typically entitled to reclaim VAT they have paid, and can do so via their VAT return filing process. For business-to-business (B2B) services, VAT is charged where the consumption takes place. For domestic transactions (i.e. a UK business purchasing a UK service) domestic VAT is charged. For cross-border B2B services, if both parties are VAT-registered, often the reverse charge mechanism applies on B2B services. That means that in the travel sector, VAT is generally taxed in the country where the services are carried out (e.g., hotel, domestic flights, train, car rental), and VAT rates vary depending on the country and type of service.

Question 2

Where is VAT applied, and what are the applicable rates?

Accepted Answer

The VAT rules are based on where the service is consumed. Not all countries impose a VAT on goods and services, this includes the United States. As you’ll note below, the rules can be complex and differ depending on the country and the travel service. For our services, this is how VAT is applied:  Hotel: VAT is charged at the local rate of the country where the hotel is located (i.e. if the stay is in Spain, the hotel service is subject to Spanish VAT). Flight: VAT charge differs depending on whether the flight is domestic or international. Domestic flights may be subject to the standard VAT rate in the country they take place (i.e. a flight from Munich to Berlin would be subject to German VAT, but a flight from Manchester to London is zero-rated in the UK). International flights are always zero-rated, meaning no VAT is charged.Train: VAT differs depending on if the train journey is domestic or international. Domestic trains are subject to VAT in the country where the journey occurs (generally, at a reduced VAT rate). Cross-border journeys distinguish between the portion of the journey that is domestic vs international.Car Rental: VAT is charged at the rate of the country where the car is provided to the customer (for rentals under 30 days).

Question 3

Is all VAT always recoverable? What are the exceptions and requirements for reclaiming?

Accepted Answer

Just because VAT is charged, does not mean you’re always entitled to recovery. Eligibility depends on the specific regulations in the country where the service is consumed (i.e. VAT charged on hotel expenses in France are not reclaimable under French law), reciprocal agreements between the country where the service is consumed and the booking company's home country (i.e. where foreign VAT reclaim is accepted), and the operating model of the booking company (i.e.  businesses with exempt sales cannot reclaim VAT). In addition, a VAT invoice from the seller of record is always required to reclaim VAT from the tax authorities.

Question 4

Is TravelPerk the ‘seller of record’?

Accepted Answer

It depends! TravelPerk’s priority is to guarantee the best prices for our customers, by offering a broad range of inventory. To achieve this, we have three supplier relationship models:Reseller: TravelPerk buys and resells content, and invoices the customer directly. This content is available on our Invoice 1 document and can be used to reclaim VAT.‘On-behalf’: TravelPerk connects the customer to the supplier through our platform, and facilitates payment, but the supplier delegates invoicing to TravelPerk. This content is available on our Invoice 2 document and can be used to reclaim VAT.Intermediary: TravelPerk connects the customer and supplier through our platform, and facilitates payment, but acts as an intermediary. TravelPerk provides a Billing Statement for payment but does not issue the original invoice to the customer, because this is issued by the supplier (i.e. hotels). This document is appropriate for accounting and income tax purposes, but to  reclaim VAT, the customer would need to collect the original invoice from the hotel at checkout. We understand this can make things complicated, so we also offer an Invoice Collection Service to take this off your hands. You can learn more about TravelPerk’s billing documents here.

Question 5

Can I reclaim VAT if I am not VAT registered?

Accepted Answer

No. A VAT registration is a prerequisite for reclaiming VAT. If you do not have a VAT ID, you are considered to be the end consumer and the transaction is considered to be business-to-consumer (B2C) so you are not entitled to reclaim VAT.

Question 6

Can I reclaim VAT on international travel?

Accepted Answer

Yes. For VAT charged on domestic travel, you can reclaim VAT through your regular VAT compliance process. You can also reclaim VAT on business travel expenses incurred in countries where your business is not VAT registered through a foreign VAT reclaim. Eligibility is based on the VAT regulations of the country where the travel took place. For instance, you cannot recover VAT on hotel stays in France, regardless of if a business is registered in France or otherwise. However, a French company could potentially recover VAT on UK hotel stays, as VAT is recoverable on UK hotels. Recovering VAT on international business trips can lead to significant cost reductions. If your business does not currently have a process to file Foreign VAT reclaim, ask us about our partnership options.

Question 7

Can I get a VAT refund on hotel stays?

Accepted Answer

It depends. Whether VAT on hotel stays is refundable depends on the local VAT rules of the country where the hotel is located. For example, France does not allow VAT reclaim for hotel stays but the UK does.

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Frequently asked questions about VAT recovery

What is VAT?

Where is VAT applied, and what are the applicable rates?

Is all VAT always recoverable? What are the exceptions and requirements for reclaiming?

Is TravelPerk the ‘seller of record’?

Can I reclaim VAT if I am not VAT registered?

Can I reclaim VAT on international travel?

Can I get a VAT refund on hotel stays?

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