Ensure the VAT refund process
VAT refund is an important part of an effective indirect tax strategy. Sometimes VAT refunds by companies are difficult or even when refunds are applied, long delays are common. Not only do taxpayers have to know when they have the right to claim a tax refund, but they also have to understand how to prepare for required tax refunds within a short period of time.
If this is not the case, problems that may arise during VAT recoveries may adversely affect the financial management of the company. To ensure the VAT refund process, a fully prepared tax refund file must be prepared with all other procedures. Although there are many mechanisms to recover VAT, it can be difficult for companies to fulfill the requirements in practice. Besides, the tax authority applies strict criteria before authorizing payment.
Obstacles to a VAT refund include a lack of understanding of detailed indirect tax rules, difficult administrative procedures, insufficient or incorrect documentation, as well as failure to comply with deadlines for responding to the Federal Tax Authority. Unclaimed tax credits and late refunds usually result in a negative cash flow and tax leakage that increases business costs.