Exporting to your country or purchasing from another country comes with a cost. Aside from customs duties, you may also need to pay Value Added Tax (VAT) if you buy from a country with a VAT regime.
The good news is that you can get back some of the tax you paid on goods you bought in some countries. In this article, we discuss what export VAT refund is, why it’s essential for business owners, and how to apply for it in Turkey and Italy.
Table of Contents
Export VAT is a tax added to goods you purchase from customers outside your country; countries such as Italy and Turkey levy VAT on goods.
While over 160 countries use value-added tax (VAT), it is most common in the European Union. Meanwhile, many of these countries also offer a VAT refund for business owners not based in the country. A VAT refund is the reimbursement of the VAT you paid on goods exported to another country as a non-resident. This means that if you reside outside the European Union and buy goods you are taking to your country, you may be able to claim a VAT refund. If you exported goods with a VAT of 10%, you could get the amount corresponding to the tax paid back if you apply.
In today’s world, international trade is thriving, with more businesses buying and selling to a global audience. While this is very profitable, it comes with extra costs like custom fees and VAT, which can be exhausting.
VAT is a consumption tax, so the final burden should be on private customers. For this reason, business owners can get a VAT refund if their business is not based or registered in a particular country. That means if you send out or order goods from a foreign supplier, you would be eligible for a tax refund on those goods.
Export VAT refund is an excellent tool for promoting exports from other countries. VAT refunds are great for business owners because they reduce the extra VAT costs already paid on exported goods. Also, a VAT refund makes it easy to do business internationally and increases your customer base without spending extra on tax.
Individuals and businesses that are non-citizens of the country with VAT charges on goods bought are usually eligible for a refund. In other words, if you pay VAT on business activities in a country where your business isn’t established, you can get a VAT refund.
Meanwhile, countries have different regulations and policies around who qualifies for a VAT refund. But in general, you are eligible for a VAT export refund if:
Businesses who incur VAT from exporting goods to a country where they do not reside or habitually supply goods/services are entitled to deduct that VAT through a refund.
Generally, export transactions are exempt from VAT in Turkey. However, Turkish VAT Law states that export must fulfill these two conditions:
Other regulations to fulfill to reclaim a VAT refund in Turkey include:
A company established in the European Union can recover its VAT in Italy if it does not conduct any taxable operations in the country. Here are some VAT refund policies for exporting to Italy:
A few steps are required to request or apply for a VAT refund. Here are some of the steps:
Before submitting your application online, it’s essential to get familiar with the reclaim policy of the country. This is to help you confirm if you are eligible for the refund.
You will need an ID that shows that you are not a resident of the country you are claiming for a VAT refund. This could be your passport, national ID card, or any other form of valid identification.
In addition to your proof of residency, you need evidence that you purchased goods and a document showing a transaction took place. So, before you apply, you need invoices and a receipt that proves that your supplier paid VAT. The invoice should contain:
To submit a VAT refund application, you need to calculate your total purchase, the VAT collected, and the VAT you can claim back.
The best way to claim your VAT refund is online through the authorities in the country your business is located. Afterward, the authorities will pass your refund claim to the right channel in the other country.
You; the applicant, or your representative need to apply with the following details:
It’s essential to submit all the required documents to increase the chances of getting a VAT refund. Also, submit the original copies of your invoices with the word invoice printed over the document. Another vital document needed is a certificate showing your business activity, including your business name, address, registration number, and nature of business.
After completing your application, ensure you read and fully understand the declaration before signing.
If your application is approved, you will get your refund within 6 months after your application. If your application is not approved, you will get a response explaining why it was rejected. Meanwhile, you may be charged a heavy penalty if your application is found incorrect or false.
Are you a seller interested in selling to a global audience? Try Alibaba.com! This e-commerce platform lets business owners sell to customers in different parts of the world. With Alibaba.com, you can set up a storefront, post your products for customers to see, and start getting orders from a global audience. Also, Alibaba.com has advanced features like advertising to reach more audiences and analytics tools to measure your performance.
To start, open a seller account on Alibaba.com, create a store for your business and post your products.
6. https://www.gurulkan.com/insights/vat-refund-in-turkey-opportunities-for-overseas-transport-companies dttl-tax-european-vat-refund-guide.pdf"