In 2015, MasterCard announced a partnership with VAT IT, a Luxembourg-based provider of cross-border value-added tax (VAT) recovery services. The two said they would offer what they described as the first cloud-based, automated VAT recovery service for credit card transactions in Asia Pacific.
The service, called VAT Cloud and powered by VAT IT, was to link with issuing bank data so that VAT embedded in corporate card transactions could be analysed and reclaimed.
The partnership and how it worked
MasterCard said the system would connect an issuing bank’s corporate MasterCard credit card data to the tax office. It would identify potential VAT reclaims from the transaction data, consolidate them, and package them into the compliant formats each tax office required. They would then be sent to the relevant authority.
Recovered VAT would be paid back to the business’s bank account. According to the announcement, the whole process could be traced from data collection to payment of the claim.
VAT IT’s fee was tied to results. It charged a percentage of each successful claim and nothing for unsuccessful ones.
The problem it targeted
The announcement described VAT recovery as an administrative, bureaucratic process. That made claims cumbersome, and businesses often lost money on foreign VAT they never reclaimed.
Philip Glickman, MasterCard’s head of commercial products and solutions for Asia/Pacific, argued in 2015 that foreign transactions and employee travel expenses carried a tax cost for companies of every size, from start-ups to large corporates. He said an automated process leaving a digital trail would save time and money.
VAT IT chief executive Saul Goldstein said the tie-up should produce large tax savings for thousands of businesses in the region. He also stressed security and the ability to follow a claim’s progress.
Availability
From January 2016, businesses across Asia Pacific were to be able to register through their issuing bank, MasterCard or VAT IT directly. VAT Cloud was to process VAT claims in 24 countries.
FAQ
How did VAT IT charge for the service?
It took a percentage of each successful VAT claim and charged nothing when a claim failed, according to the 2015 announcement.
Who could use VAT Cloud?
Businesses of any size in Asia Pacific whose issuing bank offered corporate MasterCard credit cards could register from January 2016, either through the bank, MasterCard or VAT IT.