The fashion and textile industry is synonymous with rapid trends, global supply chains, and high volume transactions, but beneath the surface of showrooms, shipments, and seasonal collections lies a less glamorous reality: significant VAT leakage.
From international travel to event participation and domestic compliance, businesses across the apparel and textile value chain are missing out on thousands, if not hundreds of thousands, in unclaimed VAT every year. Why? Because VAT is often seen as a compliance obligation, not a cash flow opportunity
In this article, we unpack where the fashion and clothing sector can uncover hidden VAT savings, and how smart, proactive management of tax reclaim can directly boost the bottom line.
A Perfect Storm of Complexity and Cost
The nature of the fashion business is inherently international. From sourcing materials across borders to attending trade shows, capturing campaign content, and importing samples, VAT touches almost every financial transaction. But most companies don’t have a dedicated VAT specialist on hand to navigate this complexity.
Instead, finance departments often juggle VAT with broader financial controls, payroll, and reporting, making it easy for refund opportunities to slip through the cracks. Add to that the speed at which the industry operates, and you have a perfect storm: high value foreign spending with limited time to monitor or recover the tax.
So, where exactly is VAT being lost in the fashion sector? Let’s explore five core areas where leakage is common and where opportunities to reclaim exist.
1. Fashion Weeks, Campaign Shoots & Global Productions
When your creative teams are shooting campaigns, running fittings, or producing shows, whether in Milan, Paris, Cape Town, or New York, the costs rack up fast. Flights, hotel stays, venue hire, equipment purchases, catering, and ground transport often carry VAT in the country of spend.
The good news? These VAT charges may present reclaim opportunities provided the expenses are tied to legitimate business activities, and meet deductibility rules and invoice formalities under local VAT laws or via foreign VAT refund mechanisms, such as the 13th Directive or 8th Directive procedures.
However, reclaiming foreign VAT isn’t simply about filing forms, it requires tracking down compliant invoices, understanding jurisdictional rules, and submitting the right documentation within tight deadlines. That’s where VAT IT’s expertise becomes invaluable: we manage this end-to-end, so you recover maximum value with zero internal admin.
2. International Sampling Trips: Small Purchases, Big Savings
Fashion teams regularly travel abroad to source trends and collect samples. These small ticket purchases, like fabric swatches, prototype garments, and merchandising pieces, are easy to overlook. But collectively, they represent a significant portion of Vatable spend.
The challenge? These purchases are often made using company credit cards, logged under generic expense categories, and filed away with minimal detail. That’s a recipe for missed refunds.
With the right approach, your sample acquisition trips can become a valuable source of VAT recovery. Most jurisdictions recognise these as legitimate B2B transactions, making VAT reclaim feasible. Leveraging VAT IT’s OCR and AI-driven technology, we are able to extract and validate data in line with compliance standards.
3. Global Trade Shows: Visibility Costs, But the VAT Doesn’t Have To
The fashion calendar is filled with trade shows and international exhibitions, from sourcing expos to buyer showcases and seasonal launches. These trips aren’t just marketing, they’re fundamental to sales growth and brand expansion.
Yet the costs of participation are high: exhibition stand hire, booth design, logistics, flights, on-site expenses, and accommodation all pile up quickly and many of them carry local VAT. .
If you’ve been treating these costs as the price of doing business abroad, you’re leaving money on the table. In many cases, VAT on trade show participation can be reclaimed, either in full or partially, depending on the country’s specific VAT rules and whether your supporting documentation meets local requirements.Businesses that build reclaim into their trade show planning don’t just recover costs, they improve their ROI across the entire event strategy.
4. Employee Travel: The Everyday Refund Goldmine
While shows and shoots are high profile, it’s the day-to-day employee travel that often represents the biggest cumulative reclaim opportunity. Whether your staff are flying for supplier meetings, retail inspections, product launches or training, these trips generate a trail of VAT inclusive expenses.
Meals, taxis, parking, rail tickets, hotel stays, coworking spaces, each one may represent reclaim opportunity . Multiply that across your workforce, and it adds up to tens of thousands in annual savings potential.
However, many businesses fall short here because their expense policies don’t capture VAT data correctly. They also lack systems to filter eligible from ineligible claims. At VAT IT, we integrate with your existing expense tools or use our own platforms to capture, validate, and reclaim what’s owed, so you can maximise returns without overburdening your team.
5. Domestic VAT Compliance: Don’t Let Assumptions Cost You
While foreign VAT gets most of the attention, domestic VAT compliance is just as critical. In fact, many fashion businesses overclaim on local expenses due to incorrect classification or poor documentation, exposing themselves to penalties, audits, and reputational risk.
Our data shows that over a quarter of local businesses believe they’re fully VAT compliant, when in reality they are misclassifying expenses, missing reverse charge obligations, or applying the wrong rates. At best, this results in refund delays. At worst, it leads to financial penalties or audit flags.
A periodic VAT compliance review, especially during periods of high growth or geographic expansion, can uncover risks and unlock previously denied refunds. It’s not just about staying compliant; it’s about doing so while improving cash flow.
Why This Matters to Finance Leaders in Fashion
VAT shouldn’t be an afterthought. For CFOs, Financial Directors, and Group Controllers, it’s a tangible way to deliver value, reduce risk, and fund innovation.
In an industry defined by fast-paced decision making, tight margins, and seasonal pressure, every opportunity to reduce costs without cutting output should be seized. VAT refunds offer exactly that, if you have the right partner guiding the process.
How VAT IT Reclaim Can Help
At VAT IT Reclaim, we work with leading brands across fashion, luxury, apparel, and textiles, helping them unlock VAT savings without adding admin to their teams. With over 12,000 clients in 117 countries, our technology and tax expertise make VAT recovery seamless.
Here’s what we offer:
- Full service foreign VAT reclaim
- Domestic VAT compliance reviews and support
- Automation tools for capturing travel and event expenses
- Jurisdiction specific expertise to reduce rejection rates
Most importantly, we work on a success based model, if you don’t reclaim, you don’t pay.
Final Thought: Don’t Let VAT Slip Through the Seams
The fashion and textile sector isn’t short of creativity, but when it comes to tax, structure matters. If your business is travelling, buying, showcasing, or operating across borders, then VAT recovery isn’t just possible, it’s essential.
Stop leaving money on the runway. Start reclaiming what’s rightfully yours.
