How US-based companies can reclaim European VAT on business trips

When your team travels across the Atlantic for key meetings, there are many ways that hidden costs can impact your budget, leaving US finance teams chasing missing receipts, converting currencies back to USD, and ensuring the correct taxes have been paid.

One of the largest contributors to this operational drain is unclaimed international Value Added Tax (VAT). Many US-based organizations completely overlook this opportunity, leaving billions of dollars on the table. Globally, an estimated $54 billion in recoverable VAT is lost every year simply because the reclamation process seems too complex, and businesses are unsure which aspects of an international trip (hotel stays, travel) are actually eligible.

Here, we explore how to ensure US-based finance teams get the most from their international business travel budget in the EU and UK.

How does the VAT refund process work in Europe?

To fully understand how VAT refunds work, it is important to set out the key differences between VAT in the EU or UK and sales tax in the US. In the US, sales tax is added at the point of sale, with the rate varying by state or county.

In Europe and the UK, VAT is built into the sticker price of most goods and services. Typically, these are set at a fixed rate of around 20%. Because of this centralized approach, US companies that are not based in Europe and are not required to pay tax can apply to have this ‘domestic’ tax refunded.

This creates an important change in focus for US businesses - while these taxes must be paid on goods, finance teams must consider them a recoverable asset rather than an accepted cost of the trip.

Expense eligibility breakdown

Typically, business expenses can be reclaimed, but personal or luxury spending cannot. Any goods or services that could be considered in a ‘gray area’ between the two, such as entertainment or luxury spending, could be rejected for not having a purely business purpose. 

Eligibility for VAT recovery will also vary depending on which specific countries are visited. The following table outlines the types of US business expenses that typically qualify for VAT refunds in Europe:

VAT rates for major European nations

As each country manages its own tax rates and requirements for businesses, make sure that the current regulations for your business trip destinations have been reviewed.

Below are the standard VAT rates for major European nations, alongside links to the government bodies to verify current rules and upcoming changes. Note these rates are indicative, based on the rate in June 2026.

Common compliance roadblocks

Basic requirements

• General eligibility is based on the rules set out in the EU’s 13th VAT Directive (Directive 86/560/EEC). Not being VAT registered in the country is a key requirement. This includes not having any taxable activity locally. In these cases, a refund should be claimed as part of a tax return instead of via the dedicated VAT refund system.

• Reclaims can only be made by US companies when the tax was charged to the company rather than an individual, making corporate cards key to ensuring the most value is captured from the trip’s budget.

• It’s also important to be aware that minimum thresholds can apply in some countries to prevent managing a large number of very small claims. Typically, this is 400 euros (~$462 USD) for claims of 3-11 months and 50 euros (~$57 USD) for a full calendar year. Claims may also need to be distinct, containing no overlap.

• As well as having the right to refuse refunds and change their own requirements, some EU countries may also require a local tax representative to be hired to manage the claim on your company’s behalf.

• Some countries in Europe require reciprocal agreements. However, this can cause complications for US businesses as the US doesn’t have an equivalent federal VAT process for foreign businesses to claim against in this way.

Reclaiming international VAT step-by-step

Step 1: Obtain formal tax invoices

A standard US-style receipt or bank statement is generally not considered to be suitable evidence for a reclaim, as it doesn’t include the level of detail required.

Currently, refunds require a formal tax invoice from the point of sale that shows:

• The vendor’s VAT details.

• The exact VAT amount listed separately.

• Your business name and address.

• An itemized description of the product/services.

Step 2: Check the rules of the visited country

Before spending hours sorting documentation, cross-reference the trip itinerary to check for local reciprocity laws. Note that, while the EU's 13th Directive governs applications across member states, the UK operates its own independent post-Brexit framework.

While many major European destinations, like the UK and Germany, will accept US VAT claims, some countries require a reciprocal arrangement for their own companies - something the US sales tax system can’t offer, and makes getting a refund approved unlikely.

Step 3: Group invoices to meet threshold requirements

Group expenses chronologically into submission by quarter or annually. As claims are not allowed to overlap, this has to be done carefully to ensure nothing gets missed and that each claim meets the host country’s minimum threshold for making a claim.

Step 4: Secure proof of US tax residency

Having identified a sufficient number of claims and checked that you are eligible to claim, the next step is to provide proof of US tax residency. This is known as IRS Form 6166 (Certification of U.S. Tax Residency) and must be applied for directly to the IRS. Because tax residency can change from year to year, IRS Form 6166 is only valid for one specific calendar year or fiscal tax period.

The current fee is $185 for a non-individual taxpayer. As the process is expected to take a minimum of 30 days, an application must be made well in advance of European filing deadlines.

Step 5: Align with national tax deadlines

VAT reclaim deadlines are strict and provide no extensions for international claimants. The standard deadline is June 30 for any VAT spend in the previous calendar year - so for any refunds of VAT paid in 2025, the request would have needed to be submitted by June 30, 2026. This equates to a deadline six months from the end of the calendar year.

As with most financial policies, they can vary between EU member nations. In some countries, including Italy and Spain, the deadline is extended to nine months (September 30).

The UK uses a ‘prescribed’ year (running from July 1 to June 30), with an application deadline of December 31.

The future of VAT reclaims in Europe

The current process is highly manual for US businesses, resulting in lost receipts or claims rejected for a lack of detail. However, a recent shift towards digital invoices could make the process simpler in the coming years.

In March 2025, the European Parliament adopted the VAT in the Digital Age (ViDA) package. This is a huge boost in the modernization of VAT reclaim processes, allowing member states to move towards mandatory e-invoicing to reduce fraud and simplify tracking.

For US-based companies using an intelligent travel and spend management platform like Perk, the newly digitized VAT reclaim process in Europe will become significantly more efficient. With tax invoices automatically integrated into the centralized management of the trip, and manual receipts no longer needing to be traced or recovered, Perk’s platform can identify and group all the required information for VAT reclaim requests instantly.

Get the most from international business travel with Perk

While international travel is key for many modern businesses, reclaiming VAT shouldn’t be a drain on your finance team’s resources or cause an increase in avoidable shadow work tasks that distract from more important work.

By replacing fragmented, manual workflows with Perk’s intelligent travel and spend management platform, your cross-border work travel expenses are centrally and automatically managed. By capturing compliant tax invoices and tracking international spend in real time, Perk can make maximizing your overseas travel budget simple.

Explore the features of our spend management solution, and then request a demo to learn more.