How to apply for export VAT refund (with examples)

Alibaba.com AUGUST 15, 20229 MIN READ
How to apply for export VAT refund (with examples)

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.

What is an export VAT refund?

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.

Why is export VAT refund important for business owners?

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.

export VAT refund

Who is eligible for an export refund?

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:

  • Registered as a business outside of the country, you are claiming a VAT refund.1
  • You are not within the EU when making a claim. It would help if you were entirely out of the European Union to qualify for a refund.1
  • You are not a permanent or habitual resident of the country. You are claiming a VAT refund.1
  • The person you purchased the goods and services from already pays VAT on them.2
  • The goods were taken out within 3 months of being bought.1
  • You are claiming within limits set by the country you purchased goods.3
  • The goods you purchased are new, and the transaction fits the requirements of an export.3

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What is the export VAT refund policy in Turkey and Italy?

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.

Export VAT refund policy in Turkey

Generally, export transactions are exempt from VAT in Turkey. However, Turkish VAT Law states that export must fulfill these two conditions:

  • Delivery must be made to a customer abroad, the buyer in the free zone, the authorized customs warehouse operator, or the goods must be deposited with the authorized customs warehouse operator.4
  • The goods must be delivered from the Republic of Turkey to a foreign country, a free zone, or exiting the customs territory by a foreigner.4

Other regulations to fulfill to reclaim a VAT refund in Turkey include:

  • The applicant shouldn’t have their residence, workplace, place of business, or any fixed establishment in Turkey. 5
  • Applicant should not perform business activities that require VAT, income tax, or corporate tax liability in Turkey.6
  • The company's country of residence must have a reciprocal agreement with Turkey.r Currently, there are 16 countries with which reciprocity is established and they include Bosnia-Herzegovina, Malta, Bulgaria, Norway, Denmark, Portugal, Finland, Romania, France, Serbia, Holland, Slovakia, Ireland, Slovenia, Italy, and Switzerland.6
  • Companies eligible for VAT refund are those that export their products in general.4
  • Businesses eligible for VAT refund must render transportation services such as the supply of fuel or spare parts. Also, businesses engaged in commercial activities at exhibitions or fairs can get a refund.5
  • The applicant must not have a business activity that can be subjected to corporate tax, income tax, or VAT.9
  • VAT refunds are submitted monthly except for international and inter-city transportation services, which they can submit quarterly.9
  • The minimum invoice amount for goods bought must be at least TRY 1.500.6

Export VAT refund policy Italy

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:

  • Suppose your business is not established in the European Union. In that case, you can claim a VAT refund only if you reside in a country with which Italy has bilateral agreements, such as Israel, Switzerland, and Norway.7
  • If your country has no reciprocity agreements with Italy, you must have a tax representative in Italy to claim a VAT refund.8
  • You can claim a VAT refund by sending an online claim to your national tax authority – which then forwards it to the Italian Revenue Agency.8
  • Refund claims must be completed on form VAT 79 issued by the Italian Tax Authorities and personally delivered or sent by registered mail or through courier.7
  • You can fill the refund claim in Italian, English, or French, but the amount must be in Euro.8
  • For claims related to a quarterly period, the minimum amount refundable is 400 Euro, while the minimum amount refundable for claims associated with a yearly period is 50 Euro.8

export VAT refund

How to apply for a VAT refund on export in Turkey and Italy?

A few steps are required to request or apply for a VAT refund. Here are some of the steps:

Get familiar with the VAT reclaim policy of the country

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.

Have proof of residency

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.

Get proof of export

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:

  • The supplier’s name, address, and VAT registration number
  • Details of goods and services bought
  • Your name and address
  • Date of transaction
  • Cost of goods (without VAT)
  • Amount of VAT charged

Calculate your claim

To submit a VAT refund application, you need to calculate your total purchase, the VAT collected, and the VAT you can claim back.

Apply through authorities in your country

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:

  • Name and full address
  • VAT or tax registration number
  • Email address
  • Description of business
  • Details of bank account to receive your refund
  • Amount to refund
  • An invoice detailing the name and address of the receiver/supplier of goods

Submit required documents

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.

Authorize signature

After completing your application, ensure you read and fully understand the declaration before signing.

Payment

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.

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References:
1. https://taxation-customs.ec.europa.eu/vat-refunds_en
2. https://www.gov.uk/guidance/refunds-of-uk-vat-for-non-uk-businesses-or-eu-vat-for-uk-businesses
3. https://www.freshbooks.com/en-gb/hub/taxes/vat-refund
4. https://guvenymm.org/vat-refund-on-export/
5. https://www.verginet.net/UserFiles/File/pusula_serisi/VAT.pdf
6. https://www.gurulkan.com/insights/vat-refund-in-turkey-opportunities-for-overseas-transport-companies dttl-tax-european-vat-refund-guide.pdf"
7. https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-european-vat-refund-guide.pdf
8. https://www.agenziaentrate.gov.it/portale/web/english/nse/business/vat-in-italy/claim-a-vat-refund
9. https://www.roedl.com/insights/vat-guidelines/turkey-rate-registration-declaration-requirements

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