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Published: March 5, 2019

VAT On Tooling: The Hidden 25% Discount on Production Costs

If you’re in the automotive, pharmaceutical or any heavy metal engineering industries, then you’ll know the extraordinarily high costs of tooling

If you’re in the automotive, pharmaceutical or any heavy metal engineering industries, then you’ll know the extraordinarily high costs of tooling. Production techniques for metal and plastic tools and machinery have a high set up cost. But there’s a way to lower these costs by up to 25% and that’s by claiming the foreign VAT back on your invoices where applicable.

Tooling costs are incurred when acquiring the components and machines needed for production such as fixtures, injection moulding, gauges, cutting equipment and patterns.

Typically, an automotive manufacturer or pharmaceutical company will design a product (medication or a car) and based on their own design they will order the parts for it from their supplier. Here’s the thing, the supplier who is capable of creating the machinery or parts to make the product are often not in the same country as the automotive manufacturer or pharmaceutical company. So instead of importing an entire machine to their country, the company will opt to keep the production machines or moulds in the country it was manufactured so it can continue to create the custom design parts that are then imported to the automotive or pharmaceutical company.

So what does this mean from a VAT perspective and where does the opportunity for saving VAT exist?

Because the machine or tools never leave the country that they were created in, the company is charged foreign VAT on those invoices – invoices that can reach into the hundreds of millions with VAT of up to 25%. It’s this VAT that can be reclaimed via the European or 13th directive.

The process to claim this VAT is complicated and requires specific in-depth claim documentation relevant to each VAT Authority across Europe. VAT IT has 25 years’ experience and has become the world expert on tooling claims.

If you think your automotive or pharmaceutical company is losing money as a result of unclaimed VAT on tooling, speak to us today for guidance.

VAT on tooling is just one of many ways that VAT IT is able to help your business save. Other costs such as employee travel, exhibitions, trade shows and import VAT are some of many costs where a VAT reclaim opportunity exists. VAT IT can help you claim back this money that is rightfully yours.

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