Reclaiming VAT Refunds with American Express

Partnership with CVM designed to simplify value-added tax refund process for companies with international business travelers

New York — June 20, 2005 — American Express has partnered with Corporate VAT Management (CVM), a VAT service company, to make the Value-added Tax (VAT) reclaim process more effective and efficient in recovering international business travel tax dollars. CVM uses a data-driven process to help American Express Corporate Card clients quantify their refund opportunity upfront and improve the VAT recovery process.

VAT reclaim is available to American Express's largest corporate clients; typically those clients with more than $1 million in international spend. There is no up-front expense for the client; fees are deducted from a percentage of the actual refund. VAT refunds are typically 2 to 6 percent of a client's international business travel-related spending. For example, a large corporation that incurs $6 million in international spend could save approximately $180,000 of that cost through participating in VAT reclaim.

Our solution simplifies the VAT recovery process by using a targeted approach to identify potential reclaim opportunities, said Shane Berry, vice president, Global Client Group, American Express Global Corporate Services. This enables our clients to prioritize the collection of VAT-eligible invoices to focus on the top opportunities, so they can recover more VAT dollars with less effort.

Every year U.S.-based business travelers pay hundreds of millions of dollars in VAT when traveling overseas for business. VAT is a general consumption tax on goods and services levied in over 100 countries around the world. Most business expenses qualify for VAT refunds, including hotel accommodations, rental cars and larger non-travel related expenses, including professional services, conferences, translation fees, business equipment and the cost of short-term office facilities. Yet most companies find that the time and effort involved in collecting the refund outweighs the potential benefit.

The challenge to VAT reclaim lies in the fact that foreign tax ministries require the original travel receipts be submitted with the tax reclaim application. Corporations fail to recover millions of dollars in available VAT refunds because they often underestimate the size of the opportunity and are deterred by the labor-intensive process required to collect the original invoices.

AutoVAT is CVM's proprietary software that American Express uses to bring the data-driven VAT management to corporate clients. It is a rules-based engine that calculates refundable VAT for transactions contained in corporate expense data and identifies these items for reporting or recovery. This enables document collection efforts to target the most valuable invoices and identify missing invoices. Vendors are contacted directly to request that missing receipts be re-issued to clients.

Most recoverable VAT can be found on less than 25 percent of international invoices, noted Berry. Knowing which invoices are the most valuable and recoverable can greatly reduce the effort required to identify and collect expense documentation. By our estimate, companies qualify for two to five times more refund than they historically recover.

Using AutoVAT American Express Corporate Card clients receive assessments of their total VAT recovery opportunity based on their card transaction data. Companies can analyze the gap between VAT incurred and VAT recovered, which enables a client to benchmark the success rate of their VAT reclaim program.

We continuously strive to improve the ability of our customers to manage expenses globally and realize tangible savings, said Berry. No other solution allows a company to see the scope of the recovery opportunity. By increasing the rates of recovery and streamlining the VAT reclaim process; we are enabling our clients to make their international business trips more profitable.

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