The National Association of Widget Builders decided after extensive deliberation to hold its first international meeting in Stockholm, Sweden. Stockholm was selected because of the enormous potential for international networking with the Swedish widget-manufacturing industry. Furthermore, the association wants to expand its international (non-U.S.) membership through this new initiative.

During the planning for the meeting, the budget was analyzed thoroughly by the U.S. accounting firm. The meeting planner and budget committee for the association concurred that the accounting firm had scrutinized the budget carefully. However, at the conclusion of the meeting the association fell into what is often called the VAT trap.

At the conclusion of the meeting, when all invoices were received, the total cost of the event was not the previously budgeted $200,000 but, rather, 250,000. When the meeting planner and her accountants reviewed the invoices, they noted that the term VAT appeared at the bottom of each invoice and resulted in an increase in the cost of goods and services of 25 percent. In addition, the 500 persons from North America who attended the meeting were unpleasantly surprised by the VAT charges, and their comments resulted in negative evaluations of the meeting.

When the executive director of the association asked the meeting planner to explain these charges, she answered, "I did not know about VAT." The executive director explained that ignorance was no excuse for this omission in the budget and that it therefore would affect her annual review negatively. Furthermore, the association decided to seek a new accounting firm. Finally, and perhaps most important, the annual budget was reduced for the following year by $50,000 to make up the previous year's loss.

The VAT trap often occurs when a meeting organizer does not realize that in many European and other countries the government may attach a value-added tax (referred to in some countries as a goods and services tax, GST or IVA which is the equivalent in Spanish-, Portuguese-, and Italian-speaking countries). This tax can range from 5 percent to 25 percent on top of the amount charged by the vendor.

In addition, attendees at your meeting may be charged VAT or its equivalent. You must inform them in advance about the VAT policies in the country where the meeting is being held and provide instructions for reclaiming these taxes if possible.

Although it is possible to apply for a VAT refund, there are no uniform procedures for doing this. Therefore, if the event organizer does not plan for this additional cost, it may affect the budget negatively. To avoid the VAT trap, the meeting planner should ask all vendors to include the following information on their quotes and bids:

The amount of VAT should be factored into the quoted or bid amount.

The procedures for receiving a VAT refund should be delineated carefully.

The proper certifications or documents to collect the VAT refund should be pro-vided by the vendor at the time of purchase.

3. How do you budget carefully to include all VAT charges?