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Many US-based SaaS and AI firms operating globally are leaving money on the table by failing to reclaim VAT paid on business expenses. Companies may not realize they can recover VAT charged on foreign expenses or incorrect charges, missing out on significant cost savings.
This guide breaks down why VAT reclamation differs so much from US tax processes, and how finance teams can systematically recover VAT on international business expenses.
What Is a VAT Refund (and How Is the USA Different?)
VAT (Value Added Tax) is a consumption tax collected at each stage of production and distribution based on the value added at that stage. This contrasts with US sales tax, which is only collected once at the final point of sale to the end consumer.
Does the U.S. Offer VAT Refunds?
Because the US has sales tax rather than VAT, there is generally no way for tourists to recover sales tax paid while on vacation. Though some states like Louisiana and Texas do offer limited sales tax refunds to foreign nationals, these are at the state-level and only deal with tax paid in those states.
US businesses, however, can claim foreign VAT paid.
How VAT and Sales Tax Differ
Both VAT and sales tax are consumption taxes paid behind the scenes, but they differ greatly in how they work.
Sales tax is generally governed by a US state’s department of revenue. VAT is generally governed by a country’s central taxing authority.
Sales tax is paid at the point of sale by the end user of a product only. VAT is charged and paid at every stage of the supply chain. A raw goods supplier charges VAT to a manufacturer, who then creates a product and charges VAT when they sell that product to a distributor, who then charges VAT to a store. That retail sale is the final stage in the VAT chain.
With VAT, even though every company who touches a product pays VAT, they can also reclaim the VAT paid on their business purchases. This means that while VAT is collected throughout the entire supply chain, the tax burden ultimately falls on the final consumer - just like with sales tax.
The key difference is timing and cash flow. With sales tax, only the final retailer deals with tax collection. With VAT, every business in the chain becomes a tax collector, but they're also able to offset what they owe by claiming credits for VAT they've already paid on their own purchases.
When Can a B2B Company Claim a VAT Refund?
B2B companies can generally claim a VAT refund in two scenarios.
Scenario 1: VAT Paid on Business Expenses
If paying VAT on business expenses, such as supplies, professional services, lodging, transport, or trade shows, your business can reclaim the VAT paid for those products and services. This is similar to claiming tax deductions for business expenses on your US income taxes.
If you are VAT registered in a country you can report this VAT paid in your VAT returns (input VAT) which will net out against VAT you owe on your sales.
If you are not VAT registered in a country and you have paid VAT on business expenses, you can claim this back.
Many US-based businesses who regularly do business in countries with VAT may not realize that this is an opportunity for cost recovery when doing business cross-border.
It’s also important to keep in mind that you can only recover input VAT depending on how those costs relate to your VAT-taxable activities. For example:
- Direct costs – If expenses directly support VAT-taxable sales (like materials for products you sell), you can generally recover 100% of the VAT paid.
- General overhead costs - This gets more complicated. For expenses that support your overall business operations (like office rent or accounting services), your recovery depends on what percentage of your revenue comes from VAT-taxable vs. VAT-exempt activities. Countries use a "pro rata" calculation: if 80% of your revenue is VAT-taxable, you can recover 80% of the VAT on general costs.
For example, if your company makes significant revenue from VAT-exempt products or services, that will affect your ability to recover VAT.
Each country also has its own list of expenses where VAT recovery isn't allowed, even for legitimate business costs. For example, in the Netherlands, VAT on food and beverages consumed on-site isn't recoverable. Other common exclusions include entertainment expenses, certain vehicle costs, and some types of accommodation.
How to Reclaim VAT on Business Expenses if you are not VAT registered
Collect VAT-Eligible Invoices by Country
Keep detailed records of your VAT paid by country. From there, document how much you paid to each vendor and how much VAT total you paid.
Compile the Right Documentation
When requesting a VAT refund, gather your proof, because tax authorities will demand to see it.
This generally includes the original invoices, original receipts, and a proof of export for goods.
Remember, you’ll be asked to prove that this was a legitimate business expense as it relates to your VAT-taxable activities.
Submit VAT Reclaim to Foreign Authorities
This is a multi-step process.
- Register your business with the VAT country’s tax authority – To request a refund, you’ll need to prove that you are a legitimate business operating outside the country. Note that this does not mean you are registering to collect VAT in the country.
- Submit your VAT refund application – Fill out the country’s tax refund form at their official website and pass along any required documentation. Note that every country’s refund program is slightly different in the hoops you must jump through to reclaim VAT. Always be sure to submit on time, or you may lose the chance to reclaim your funds.
- Track your application – This process isn’t always straightforward. You’ll sometimes be questioned or asked to provide additional documentation to support your refund’s legitimacy. Be prepared to answer taxing authorities quickly when your claim hits a snag.
What Are the Rules and Deadlines to Watch?
Every country’s VAT refund rules are a little different, but here are some commonalities you should know about.
Key Eligibility Requirements
- You should not be VAT registered or established in a country – If you are, then refund claims should be made when filing your VAT return rather than using the separate VAT refund system.
- You should have no local taxable activity – If you are also making sales in the country, then you’ll likely be asked to register to collect VAT rather than using the VAT refund system. Don’t get caught out being noncompliant!
- Expect reciprocity requirements – Some jurisdictions will only refund VAT to foreign businesses whose countries also offer tax refunds.
Minimum Claim Amounts and Deadlines
Some jurisdictions won’t honor very small claims but instead require a minimum amount of VAT owed before they will refund. In the European Union (EU), you must claim a minimum of 50€ per year or 400€ per quarter.
Further, you must claim VAT by the deadline. In the EU, this is June 30 each year to recover the input VAT incurred during the previous calendar year for most claims.
Treat VAT refund deadlines like any other tax deadline and plan accordingly.
Scenario 2: VAT Charged in Error on B2B Transactions
The other most common scenario when it comes to VAT recovery is when your business inadvertently charged VAT to a customer when it should not have.
For example, your customer forgets to provide their VAT ID at the point of sale, and you charge VAT as if they were a consumer. Your business then remits the collected VAT on your next VAT return.
If you discover evidence that a transaction was actually B2B rather than B2C (such as a business email address used during purchase), you may be able to request a VAT refund for tax incorrectly collected and remitted. However, determining whether a transaction qualifies as B2B or B2C depends on specific facts and circumstances, so we recommend consulting a VAT specialist for guidance.
How to Reclaim VAT Charged in Error
When it comes to Scenario 2 above, you can reclaim lost VAT. While this can be lucrative for businesses, it's also a multi-step process.
How to Spot VAT Errors on B2B Invoices
In your accounting process, be on the lookout for VAT erroneously charged on B2B sales. Note that you are still liable for erroneously charged VAT, and only if certain conditions are met can you request a refund (e.g. evidence that suggests a transaction is B2B such as professional emails used on purchase).
File a Refund Claim with the Tax Authority
Every taxing authority handles VAT refund claims differently. You’ll need to follow their VAT refund claim process, and file for your refund by their deadlines. Unfortunately, there is no one-size-fits-all solution for VAT reclamation across jurisdictions.
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How Sphere Helps Automate VAT Refunds
Too busy growing your business to deal with time-consuming administrative hassles like VAT refunds? Sphere will soon have you covered.
Reclaiming VAT on B2B Expenses
Sphere automates reporting VAT payment on expenses for your business so that you can submit VAT refunds to various tax authorities.
We also validate the B2B status of your vendors so you don’t create the same problem by erroneously charging VAT.
Reclaiming VAT erroneously charged on B2B transactions (Coming Q4 2025)
We’re excited to announce that we’re turning Sphere’s AI-native platform to VAT refunds in Q4 2025.
This new feature identifies transactions where VAT may have been incorrectly charged and provides backing data to support the B2B status of these transactions. No more eagle-eying every invoice to find VAT charge errors and then filling out tedious VAT refund claims in every country where you do business.
The Bottom Line—Don’t Let VAT Refunds Go Unclaimed
Ready to stop leaving money on the table? Many growing businesses are unknowingly overpaying VAT by thousands of dollars each year. That’s money that could be funding your next product launch or market expansion instead of sitting in foreign tax authorities' coffers.
Because US companies don’t deal with VAT at home, it’s easy to ignore the opportunity to reclaim VAT. Yes, the VAT refund process before Sphere’s platform was available was tedious, but the returns were always real. With VAT rates as high as 27% in some countries, you can be losing real money.
And now Sphere automates the VAT recovery process so you don’t have to. Whether you’re recovering tax paid on SaaS subscriptions, travel, or trade shows, we make reclaiming VAT smarter and faster.
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