It’s easy to turn a blind eye to the fact that your pharmaceutical company might be losing thousands of dollars every year in tax savings — savings that are actually rightfully yours.
This is because the worlds of both domestic and foreign value-added tax (VAT) and tax recovery is intimidating. The are many laws to know and they’re complex and the process of seeking refunds is complicated and burdensome.
There are so many ways to save your company money and contribute it to your bottom line. Here are four ways to save cash through VAT/tax recovery:
Recover VAT on Travel-Related Employee Expenses
You can recover both domestic and foreign travel related expenses. While larger supplier invoices are by standard put through local VAT returns often local travel goes amiss due to it’s cumbersome volume. The same applies for the often more neglected foreign travel expenses. A company can recover VAT charged on accommodation, food, transport and mobile phone use.
Recover VAT on Tooling
Tooling costs are incurred when acquiring the components and machines needed for production such as fixtures, injection moulding, gauges, cutting equipment and patterns.
Typically, a pharmaceutical company will design a medical product and, based on their own design, they will order the parts for it from their supplier. Here’s the thing: The supplier who is capable of creating the machinery or parts to make the product is often not in the same country as the pharmaceutical company. So instead of importing an entire machine to their country, the company will opt to keep the production machines or moulds in the country it was manufactured so it can continue to create the custom design parts that are then imported to the pharmaceutical company.
Tooling VAT can accumulate into millions and can contribute to your company's profit.
Recover Import VAT on Clinical Trials
This is another area where pharmaceutical companies have opportunities to save money through VAT recovery. Import VAT is charged on any goods that are shipped to Europe for testing and trials, and you can claim this import VAT on the value of your medication or medical units that are shipped DDP.
Goods VAT Raw Materials
A pharmaceutical company can also recover VAT incurred on the purchase of drugs, supplies and raw materials in Europe and Australia/Asia as well as on CRO invoices for international services.
Costs such as employee travel, exhibitions, trade shows and supplier invoices are other areas where a VAT reclaim opportunities exist.