Value-added Tax: Reclaiming Extra Costs

Like most business people in the United States, exhibitors and tradeshow organizers pay sales tax. In the European Union, it's called a value-added tax (VAT), and sometimes organizers can be reimbursed for it, if they plan ahead.

Britta Eriksson used Germany, one of the largest tradeshow markets in Europe, as an example. Erikkson is with Euro VAT Refund, a company that helps U.S. companies reclaim the tax.

"They need to register for VAT in Germany, and they need to charge the VAT to their U.S. or foreign customers," she said, adding that companies "absolutely cannot" reclaim the VAT if they do not register to do business in Germany and do not pass the expense along to their customers. Otherwise, the hefty 19-percent VAT charged by the German government becomes an additional cost to the tradeshow organizer.

Registering "needs to be done at the planning stage," Eriksson emphasized. If it is, organizers or exhibitors can then file forms with the German government — much like tax returns in the U.S. — and reclaim the tax.

"We assist in the whole process," Eriksson said, of Euro VAT's clients.

One client is B-For Intl., which organizes national pavilions and custom booths at international tradeshows all over the world.

Carol Burke, CFO of B-For, said she thought most of the company's exhibitors reclaim the VAT they pay for a tradeshow abroad. Euro VAT helps the exhibitors, but Burke said B-For provided the exhibitors with German contact information too.

"We make sure our invoices meet all the requirements," she added.

Koelnmesse Inc., the U.S.-based affiliate of Koelnmesse tradeshow company in Cologne, Germany, recommended that customers submit their original receipts to Germany as soon as they can, said Mette Petersen, president and managing director of the company's U.S. division. Koelnmesse also recommends customers to Euro VAT.

Expenses with VAT added that can be reimbursed include train fares, hotel charges, restaurant bills and exhibiting fees. Exhibitors should submit the original bills.

"We try to provide our customers with as much information as possible," Petersen said.

About 90 percent of Koelnmesse's events are in Cologne, but the company also organizes some in Asia and is launching its first U.S. show in February.

B-For is registered in Germany — where about 65 percent of its overseas business is — as well as the United Kingdom and Sweden, which isn't part of the European Union and has different VAT rules than the others, Burke said. The company also stages shows in Italy and is preparing to participate in one in the Czech Republic.

"Right now, I'm trying to determine the Italian value-added tax laws and if we're able to reclaim that," Burke said.

That may be a challenge, she noted. After multiple trips to the country over the past three years, B-For has never been successful at reclaiming the VAT in Italy.

Eriksson said it's beneficial to register with the countries in northern Europe for VAT, but it's more complicated in southern Europe and often simply not cost-effective. In fact, Italy and Spain don't refund VAT to U.S. companies at all, she added.

Burke confessed that recovering VAT expenses can be complicated. "Each country is different," she said.

In the United Kingdom, for example, the VAT laws are so simple that she files to reclaim the tax herself on a quarterly basis, not even requiring Euro VAT's help.

In Germany, however, the laws have changed in the past few years, making it more difficult. Germany hasn't always been quick with reimbursement either.

"We still have not been paid for the 2006 VAT that we have filed for," Burke said, adding that the amount approaches €180,000. The company received about the same amount dating back to 2005 only a few weeks ago, and might have to wait until May for the 2006 reimbursement.

In 2007, Germany began requiring that foreign tradeshow organizers bill exhibitors for VAT.

The changes in Germany have made it more complicated to reclaim VAT, Petersen said, but most of the companies Koelnmesse works with realize that it's a part of doing business internationally.

"It includes more accounting procedures for us," she added.

Eriksson pointed out that organizers looking for price quotes from European venues or suppliers shouldn't automatically assume their bids include the VAT.

"That's a big thing to look out for when they look for quotes," Eriksson said.

The biggest challenge, Burke said, is just knowing who to turn to for advice before sending invoices.