Value-Added Tax (VAT)
A consumption tax levied at each stage of production and distribution, charged on the value added at each step and ultimately borne by the end consumer.
Value-Added Tax is an indirect tax applied to goods and services at every stage of the supply chain, with each business in the chain collecting tax on its output and reclaiming the tax paid on its inputs — so that the net tax burden at each stage is only on the value that business added. For businesses that are VAT-registered, the tax is essentially neutral on costs: they collect it from customers and reclaim it from suppliers. For end consumers and non-VAT-registered organizations, it is a real cost.
Why it matters
VAT reclaim is a material savings opportunity for corporate travel programmes operating internationally. Business travellers incur VAT on hotel stays, car rental, meals, and other expenses in markets where their organisation can submit a reclaim. In the EU, for example, businesses from other EU member states can reclaim local VAT on qualifying business expenses. For programs spending heavily in multiple European markets, VAT reclaim can represent a recovery of 10-20% of the applicable spend — a substantial source of program savings that requires systematic process management to capture.
How it works in practice
VAT reclaim requires collecting valid VAT receipts with the supplier's VAT registration number, the VAT amount shown separately, and the purchaser's business name. Claims are submitted either through the tax authority in the market of spend (for direct reclaims) or through specialist VAT reclaim service providers who operate on a contingency fee basis. The process requires accurate categorization of expenses and consistent receipt management — categories and markets vary in their eligibility, rates, and documentation requirements.
The takeaway
If your organisation incurs substantial travel spend in VAT jurisdictions — particularly across Europe — conduct an annual assessment of reclaim potential versus actual recovery. Many organizations leave VAT reclaim money on the table because receipt capture is inconsistent or the reclaim process is not set up. Engaging a VAT reclaim specialist is typically ROI-positive within the first year for programs spending more than $500,000 in eligible markets.