VAT recovery of crossborder indirect tax charges
Or: how to get ROI on your cost modelling software as soon as possible.
The VAT Challenge in Crossborder Banking
European financial institutions, especially banks, are uniquely challenged with Value Added Tax (VAT) intricacies. In regions like the Netherlands, banking services are exempt from VAT, leading to an inability to reclaim VAT paid on purchases. This often results in “double VAT” situations, where services and products purchased in one country (like the Netherlands) and charged cross-border within the same company attract VAT twice.
Case Study: A Path to VAT Recovery
A global banking entity, headquartered in the Netherlands, with significant operations in Europe, mirrors these VAT challenges. With a substantial IT department in the Netherlands, this bank was deeply impacted by cross-border intercompany charging inefficiencies.
With our software we helped them to trace costs from the invoice to the business unit. Our solution was crucial for several reasons:
- Design Flexibility: CostPerform allowed the bank to develop various allocation mechanisms tailored to its unique needs.
- VAT Separation in Costs: The software adeptly separated VAT from costs, a vital feature for VAT recovery.
- Detailed Reporting for Tax Authorities: It provided comprehensive reporting and audit trails for allocations, facilitating interactions with the Dutch Tax Authorities.
By using CostPerform, the bank could significantly mitigate the impact of double VAT on international IT charges, showcasing the tangible benefits of effective cost management.
Key Features of CostPerform that helped in this case
CostPerform distinguishes itself with several unique capabilities:
- Comprehensive Cost Tracking: It uniquely tracks costs from the invoice level to the business unit.
- Data Integration: Seamlessly integrates with general ledgers and other financial and operational data sources.
- Efficient ETL Functionality: Facilitates efficient data uploading with live data import via API.
- Project Success Essentials: Design flexibility, VAT separation, and detailed reporting are key to its efficacy.
Why CostPerform is Vital for Financial Institutions
This case highlights the substantial advantages for financial institutions using CostPerform:
- Clarity in Intercompany Charging: Ensures transparency in intercompany charging, critical for multinational institutions.
- Compliance and Reporting Facilitation: Offers detailed audit trails for complying with tax regulations and authority reporting.
- Enabling VAT Recovery: Most importantly, it facilitates VAT recovery, significantly reducing the financial impact of double VAT.
In summary, European financial institutions stand to gain immensely from VAT refunds, but this requires robust cost management software like CostPerform. With its ability to track costs, ensure compliance, and aid in VAT recovery, CostPerform converts a regulatory challenge into a fiscal opportunity for these institutions.
How CostPerform helps
financial insititutions
See cause and effect relationships with the CostPerform calculations
Make reports on several levers: per client, per sales manager, et cetera
Collect data for exclusive analysis on where to improve the performance
The software monitors and reduces the costs whenever it is possible
CostPerform clients in the financial services industry
- Texas Capital Bank, USA
- American Century Investments, USA
- PGGM, the Netherlands
- European Investment Bank, Luxembourg
- ING Bank, the Netherlands
- Oxford Financial Group, USA
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