Way 2 Vat plans ASX listing to build up VAT refund platform

Technology developer Way 2 Vat is aiming to make its ASX debut at the end of the month in a bid to scale its AI-led tax refund platform.

The Israel-based company has developed a proprietary, patented, fully automated platform known as the ‘W2V platform’, which has the capacity to reclaim various types of value-added tax (VAT) across many verticals, industries and markets.

Way 2 Vat is seeking to raise at least $12 million and up to $15 million through the issue of 60-75 million shares at$0.20 each.

This offer indicates a market capitalisation of about $57-60 million upon completion.

The offer closes on 20 March with the company expected to start trading on the ASX under ticker code ‘W2V’ from 27 March.

What is VAT?

VAT is a tax paid by consumers according to the value added to goods and services at each stage of the supply chain, from production to the point of sale.

In some countries including Australia, it is known as the goods and services tax (GST). The rate can vary in each jurisdiction and country.

Around 165 countries operate a VAT or similar system and in 2016 when Way 2 Vat’s pilot platform was launched, VAT accounted for about 30.6% of all tax collected in OECD countries.

Businesses and consumers such as tourists have the right to recover VAT paid on goods and services that were purchased overseas (generally after reaching a certain threshold).

But according to Way 2 Vat, about 90% of tourist-paid VAT, equating to about €23 billion (A$40.1 billion), is not reclaimed due to long waiting lines at the airport, requirements to navigate complex forms and high commission fees.

In addition, the company claims more than 20% of businesses fail to recover any foreign VAT they incur on business expenditures, such as hotels, taxis, car hires, conferences, trade shows and training. This is mainly due to the policies of the foreign tax authorities including differing regulations and deadlines as well as language barriers.

Way 2 Vat’s platform uses artificial intelligence technology to process invoice images in multiple languages and transform these images into data to “seamlessly” complete the requisite VAT reclaim forms for submission to the relevant tax authorities.

The company first launched its platform in Israel in 2016 and has since expanded into Europe and Australia.

It has also entered into various arrangements to integrate the platform with third party expense management systems and accounting software vendors.

Scalable business model

Way 2 Vat describes its business model as “attractive and scalable”, with revenue derived from clients for each successful VAT reclaim transaction that it processes via the platform.

According to the company, the platform can process large volumes of reclaims without substantially increasing the cost of processing these applications.

Over the past year, Way 2 Vat’s clientele has grown from 72 clients in the second half of 2018 to 122 clients in the second half of 2019.

The company said it aims to utilise its platform to become the only VAT reclaim platform to serve three different verticals – enterprise clients, small and medium enterprise (SME) clients, and consumers.

Growth strategy

In the chairman’s letter of the released prospectus, Way 2 Vat non-executive chairman Adoram Ga’ash said the board was pleased with the company’s achievements to date, believing it is strongly positioned to capture value from the global VAT reclaim industry and implement its growth strategy.

Following completion of the offer, he said Way 2 Vat planned to “expand its geographical reach in the enterprise market by growing its sales through its European hub in the United Kingdom and targeting new clients with multi-million dollar annual revenue, or at least 3,000 employees and with substantial travel expenditure (which may result in foreign and/or local VAT reclaims)”.

Mr Ga’ash said the company also aimed to increase its corporate direct sales by establishing additional sales offices in the European and the Asia Pacific regions and develop a scalable SME solution.

This solution “will utilise the W2V platform and be deployed to facilitate an SME offering via indirect channels, such as partnership arrangements with expense management systems and accounting software vendors”, he said.

In addition, Mr Ga’ash said the company would seek to develop a separate solution on the platform for consumers and tourists.

Use of funds

Way 2 Vat said the minimum $12 million being sought through its IPO will provide the company with working capital to execute its growth strategy.

In particular, this will be spent on: sales and marketing costs including establishing additional offices and dedicated sales teams in the European and Asian Pacific regions; research and development of the W2V platform including AI technology development and third party software integration; compliance and security; customer fulfilment and support; and patent applications.

The listing is also expected to provide the company access to capital markets to improve its financial flexibility for future growth opportunities and to provide the benefits of an increased profile as a listed entity.