VAT on tooling can add 27% to production costs for manufacturers

Significant Impact of VAT on Tooling Costs: Tooling expenses, essential for manufacturing operations, can incur VAT costs of up to 27%, significantly increasing overall production expenses. For example, a €1 million tooling investment may result in €270,000 in VAT, impacting available capital for R&D and expansion.
Complexity of VAT Recovery: While manufacturers can often reclaim VAT on tooling costs, the recovery process is complicated by cross-border transactions, compliance risks, and strict deadlines, requiring careful management to avoid penalties and ensure successful claims.
Key Considerations for Manufacturers: Manufacturers must navigate local VAT registration requirements, adhere to tight deadlines for VAT refund submissions, and ensure accurate invoicing to prevent claim rejections, all of which add layers of complexity to managing VAT on tooling costs.

Source Fintua

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