Value-Added Tax (VAT) is a national sales tax on goods and services levied by many countries around the world. In 1987, the European Union (EU) began offering refunds of VAT to foreign companies that travel to participating EU countries for business purposes.
Depending on the country, VAT may be refunded on: hotels, restaurants, car rentals, parking, gasoline and diesel fuel, transportation within country, business entertainment, telecommunications, conferences, trade shows, training courses, and professional fees. Certain VAT is not refundable, such as on alcohol and laundry services.
University travelers must participate in the VAT program by submitting their ORIGINAL receipts so refunds can be pursued. Receipts that are based on OCONUS per diem are not reviewed for any other purpose.
To request the addition of an OCONUS location, a request is submitted to the ERS Help Desk with as much information as possible on the location: the country and province where applicable, a well-known location nearby, anything that will aid the Help Desk match the new location to an appropriate per diem rate.
The Value-Added Tax Reclamation submission procedure is initiated in ERS by using the VAT Receipt Transmittal form available in the Print menu of the expense report. The VAT Chart provides a list of countries currently participating in the VAT refunds for USA-based entities and the types of expenses that are eligible.
Countries have expirations on VAT claims so it is imperative that VAT receipts be processed as soon as possible. All travel expenditures (including those on the purchasing card) must be settled in ERS no later than 60 days after the end of the trip (30 days if the travel is changed to a restricted fund and is completed in the last month of the sponsored agreement).
Reclamation of VAT by travelers to European countries requires the traveler to retain and submit receipts. Eligible receipts must fit the following criteria:
- They must be original receipts. Copies will be rejected.
- They must have a date which corresponds to the tax period in which the claim is being made.
- They must show that VAT was levied.
- They must show a supplier name and address.
- In the U.K. only, they must show a VAT registration number.
At the time the traveler returns from a trip, he/she is required to settle his/her expenses per the University Travel Policy. All travel expenditures (including those on the purchasing card) must be settled in ERS no later than 60 days after the end of the trip (30 days if the travel is changed to a restricted fund and is completed in the last month of the sponsored agreement). When completing a travel expense report, if a foreign country is entered in an itinerary or expense, or is pulled in by a purchasing card charge, an audit rule will take effect which displays the following exception message: "This report includes expenses that may be eligible for VAT Reclamation. Please print the VAT Transmittal Cover Sheet from the Print menu (Exhibit "A") and submit the specified receipts to Accounting Operations."
This will prompt the traveler (or delegate) to review the receipts and print the VAT Transmittal Cover Sheet from ERS.
- Important: Original receipts are required for VAT reclamation submissions, including meal or lodging per diem expenses. Travelers need to be aware that submitting the original receipts for expenses which fall under the OCONUS per diems will not impact the amount of their reimbursement, even if the actual expenses are lower than the per diem. Also, the VAT original receipts which are not required for per diem purposes will NOT be scanned into ERS.
Once the travel expense report is entered, the traveler (or delegate) should staple the required original receipts to the back of the VAT Transmittal Cover Sheet from ERS (Exhibit "A") and mail them to Accounting Operations in 202 James M. Elliot Building at University Park.
Accounting Operations will continue to accumulate the VAT reclamations and submit them quarterly to the University's third party collector. With this processing in place, Accounting Operations has the capability to run reports from ERS to locate any pending VAT reclamations and follow-up with the department for original receipts.
The third party processor goes through the transmittal sheets and processes the receipts as necessary to comply with each country’s submission requirements. The third party acts on behalf of the University and performs all of the interactions with each country.
Any VAT refunds are sent from the country payable to the third party. The third party deducts its commission from the refunds and wires payments to Accounting Operations along with the details by report key/foreign drafts by PSU identifier.
VAT refunds, less processing fees, will be deposited and processed by Accounting Operations and will be credited to the accounts which incurred the expenses (as reported on the VAT Receipt Transmittal sheets and dependent on the itemized amounts recovered and reported by tracking number to the University by the third party). Accounting Operations will process a ROCR, record the Journal Voucher debiting the holding ledger (0755) and crediting Administration Area (ERS) or charge account (foreign drafts), and notifies the appropriate Financial Officer (FO) via email that he/she received VAT income.
The Financial Officer is responsible for ensuring that procedures pertaining to the accountability and safeguarding of all cash receipts, cash funds, and other assets are established and followed in accordance with approved University policies and procedures. Regular audits relating to advances, cash, travel, equipment accountability, and other expenditures provide a means to protect University assets. The Financial Officer is responsible for working with Internal Audit when audits are being performed in the administrative area, as well as performing an annual audit that is submitted to the Assistant Controller.
Record retention must be managed in accordance with Policy AD35 - University Archives and Records Management, and records schedules approved by the Records Management Advisory Committee, Office of General Counsel, and Office of the President. These retention requirements are the University's retention criteria, either derived or based upon federal, state, and local statute or regulations, industry standards, and business needs. Retention beyond recommended time periods require justifiable reasons and warrant review by the Records Management Officer or designee. All documents must be maintained in such a manner so as to provide ease of access for review, and to provide a suitable audit trail for all transactions.
- Documents subject to a Legal Hold (see AD35, Legal Hold). A legal hold will remain in effect until it is released in writing by the Office of General Counsel.
- Documents under audit or review, either internally or externally. The retention period extends until released by the Corporate Controller's Office. The Financial Officer will be notified regarding any accounts which are under audit; the Financial Officer will be responsible for contacting the department.
Additional questions may be directed to the University Archivist or the Records Management Officer.
For questions, additional detail, or to request changes to this procedure, please contact the Director of Accounting Operations.
Date Approved: 11/10/14
Most recent changes:
- Rev 2 - dated 11/7/14 (Major revision - Third-Party Provider changes)
- Rev. 1a - 08/04/05 (Minor Revision)
- Rev. 1 - 02/18/03
- Original - 06/11/01