Tax laws are changing all the time, which makes it difficult to know exactly what you must pay, what you can deduct, and what you can actually claim back. As a result, businesses — especially small businesses who might not afford a full-on tax advisor — overpay their taxes all the time.
Despite all the policy fluctuations, there are still some fundamental best practices to ensure your business gets back as much dough as possible from the government.
And since we know that reading about tax returns is probably not your idea of a good time, we’ll keep this short, sweet, and to the point!
1. Always ask for a tax receipt!
Make this a habit, seriously. Why ask for a tax receipt? You can claim back the input taxes you’ve paid on those purchases. No tax receipt, no tax refund.
So, make sure you get proper documentation whenever you make a purchase. Not all receipts are acceptable for tax refunds. A proforma invoice or credit card slip will not suffice. Take a moment to read more about tax receipts and what they entail.
If your business uses a tax software such as Quaderno, each of your customers receives a proper tax invoice with every payment, so they are all set when tax season rolls around. They don’t need to get in touch with you at the last minute, sending you scrambling to re-issue new invoices with added information. These automatic, tax-compliant invoices are a win-win; neither side has to worry. (Sounds almost relaxing, eh?)
So just keep this in mind when you are the buyer! Every invoice you receive should comply with the tax requirements in your country. Stay on the vendor to provide you with the detailed tax receipts …and maybe suggest they use an automatic tax tool. 😉
2. Know your write-offs.
Know all the expenses that qualify for a deduction in the respective country. This may require a bit of research upfront, but that research pays dividends every tax season.
In the EU, most countries recognize these expenses as VAT deductible:
- Car rental and fuel expenses
- Accommodation and meals
- Public transportation and taxis
- Trade shows and business conferences
- Marketing expenses and professional fees
- Intercompany seminars, services, and travel
- Import VAT and logistics
- The cost of owning your domain name, web-hosting, website design, and internet access
Note: Do you run your business from your home? A home office could be eligible for a tax deduction, depending on the country and some internal rules. In the US, for instance, the IRS stipulates that the home office space be used “exclusively” and “regularly” as your “principal place of business.” Whatever percentage of your home you use for business, you can deduct that percentage of your mortgage or rent. (This also applies to other home costs, like utility bills, insurance, and maintenance!)
Think of tax-deductible expenses as an investment in your business. You’re purchasing tools and services that help your business grow — and that eventually save you money on taxes.
Tracking these expenses properly is the only way you can reap the reward, though. To do so manually, you have to stay meticulous about your record keeping.
3. File early.
Okay, so filing early is a luxury that not every business owner can afford. You have a hundred other things to worry about! Maybe you consider yourself lucky if you even file on time. We get it, but we also feel compelled to mention the benefits of an early filing.
Simply put, the earlier you file, the earlier you learn what you owe… or, hopefully, are owed. You can review the deductions to ensure everything is accounted for in the final refund. You can right errors before the deadline. And obviously, you avoid late fees.
Other things to check:
Is there a minimum refund amount in your country?
Some countries stipulate a minimum refund amount in order to even make a claim. For example, the UK has three tiers with different thresholds:
- For claims covering a period of more than three months but less than a full calendar year, the minimum amount business owners can reclaim is €400.
- If the claim covers an entire calendar year, the minimum is €50.
- VAT amounts totalling less than €50 cannot be reclaimed at all.
You can check out the tax refund policies of individual EU member states in these national VAT refund reports from the European Commission.
Do you need to be registered for taxes in order to claim a refund?
You might assume that if you’re filing a tax return in a country, then you’re already registered in the national tax system. But just to be clear: in order to file a claim for a refund, you must be registered for taxes in most places, including the EU. Read more about how to register for EU VAT.
How Quaderno can help
Remember those automatic, tax-compliant invoices we mentioned? There’s more. When it’s time to file your taxes, our instant tax reports will help you finish filing in minutes. In one click, you’ll have all of your tax return information in one place.
(Or, if you'd rather leave tax returns to the professionals, we'll connect you with a verified tax filing service!)
We handle taxes on the sales side -- sales tax, VAT and GST. Every step is automated, no matter which country you’re selling to. We charge the correct tax on every sale across any sales channel, track tax thresholds, and account for exemption rules so you never overcharge a customer.
Get back your time and peace of mind, and try Quaderno for free for 7 days.
Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the Tax Agency.