The fashion, clothing and textile industry is incredibly vulnerable to VAT leakage linked to both their foreign expenditure as well as local input VAT.
There are many areas where the fashion industry can reclaim VAT refunds and stay on top of their domestic VAT compliance. The VAT savings on these expenses can add up to the hundreds of thousands and contribute significantly to the company’s bottom line. All your finance department need do, is look.
Below are 5 areas specific to the fashion, clothing and textile industry where due to the nature of business, opportunities for VAT refunds exist both on local soil and oversees:
1. Shows, Shoots and Shots
Whether your business’s fashion show, photoshoot or filming is done locally or overseas, all related expenses are subject to local or foreign VAT and is refundable. VAT on hotel stays, travel, equipment and venue hire and related costs are all claimable expenses.
2. Savings While you Sample Shop
Many clothing and merchandise companies travel abroad to buy samples of the latest trends. Because these sample purchases are seen as necessary business costs related to your industry, they are also refundable in most jurisdictions.
3. Trade shows and Events
One of the costliest expenses for many in the fashion industry is the attendance or exhibition at international trade shows and events. All expenses relating to these trips whether local or foreign is refundable such as accommodation, exhibition-related expenses and transport.
4. Employee Travel
The “bread and butter” of VAT refunds lies in general employee travel and entertainment. If your business has many people travelling both locally and abroad, there is a huge opportunity to claim back the VAT that’s rightfully your company’s from the many foreign and local destinations you may be travelling to.
5. Domestic VAT Compliance
We have found that 27% of local businesses believe they are being VAT compliant when transmitting their local returns but are not achieving 100% compliancy. This leads to overclaiming on non-claimable expenses and the increasing risk of VAT authority penalties and unwanted audits. Ensuring your business is 100% VAT compliant while still finding opportunities to increase local VAT savings should be top of mind for any Financial Director.
If you’re in the finance team of a clothing, fashion or textile company, it’s completely risk-free to look into your VAT savings. The refund opportunity loss and the compliance risks of not looking into the above can cost your company thousands in VAT leakage.
About VAT IT
VAT IT assists over 12,000 international corporate clients from fortune 500 multinationals to SME start-ups. We assist companies to reclaim foreign VAT and achieve local VAT registration and compliance in 117 countries.
Our technology-driven solutions and premium service model removes all administration burden on your finance team so that all you have to do is sit back and wait for your refunds while being safe in the knowledge that all your claims are 100% compliant.