VAT/GST Refunds Survey 2014

Executive summary

Globalization is expanding the reach of businesses to new markets; multinational companies are now able to source suppliers from virtually anywhere in the world; and e-commerce enables them to ship their products and deliver their services to tech savvy customers in the farthest regions of the world.

An important consequence of this phenomenon is that many multinational companies are incurring Value Added Taxes (VAT) and Goods and Services Taxes(GST) in an ever increasing number of countries.The question of whether they can obtain a refund of the VAT or GST they incur on a timely basis and with a minimum of compliance costs, is a critical financial, tax and business efficiency issue.

Anecdotally, the story we hear from many of our clients is that accessing VAT/GST refunds is getting more difficult. Some countries preclude refunds altogether, while others may allow refunds in theory, but in practice the payment of refunds is being excessively delayed, processes can be expensive to comply with, and in some cases may be an automatic trigger for a costly audit.

According to the Organisation for Economic Co-operation and Development (OECD), the principle of neutrality which underlies the operation of indirect taxes such as a VAT and GST is designed to ensure that the burden of VAT/GST does not lie on taxable businesses. Consequently, refund entitlements should be provided to both domestic and foreign businesses efficiently, with a minimum of compliance costs, and non- discriminately.

In this survey, KPMG has examined and evaluated the ability to obtain refunds of VAT and GST across 65 countries. We found that:

• 40 percent of countries process VAT/GST refunds efficiently for resident businesses, whereas 15 percent of countries generally do not allow VAT/GST refunds for resident businesses, or do so only in limited circumstances;


• 34 percent of countries process VAT/GST refunds efficiently for non-resident businesses, whereas 29 percent of countries generally do not allow VAT/GST refunds for non-resident businesses, or do so only in limited circumstances;


• The Europe,Middle East and Africa(EMA) region processes VAT/GST refunds the most efficiently for both resident and non-resident businesses, whereas the experience among Asia Pacific and Latin American countries was less favorable;


• Of the 31 OECD member countries surveyed, 58 percent process refunds efficiently for resident businesses and 58 percent also process refunds efficiently for non-resident businesses, although the countries are not the same. This suggests a strong correlation between the membership of the OECD and implementation of the OECD International VAT/GST Guidelines;


• Perhaps not surprisingly, there appeared to be a general correlation between the efficiency of payment of refunds and a country’s general level of economic development. This was highlighted in the results for the BRIC countries - Brazil, Russia, India and China - as well as for those European Union (EU) member states such as Italy, Portugal and Spain experiencing fiscal challenges.

This survey should be an invaluable toolkit for Chief Financial Officers, Tax Directors, and Global and Regional Indirect Tax Directors to understand the practical experience of obtaining refunds of VAT/GST in most of the major economies around the world.

It allows businesses to know whether VAT/GST on expenses should be factored in as a real cost, and to manage cashflow and expectations in terms of securing refunds. Importantly, it also allows businesses to better prepare for the challenges of securing refunds.

Finally, it is hoped that this survey may be used to encourage governments and tax authorities around the world to recognize best practices, and to make improvements in their own systems and processes to better facilitate the timely payment of legitimate refund entitlements.

VAT/GST Refunds Survey 2014