Exemption

Exemption from VAT means that the rules in the VAT Act do not apply to the supply. This means you do not need to calculate VAT for a specific good or service. Exemptions can apply to specific professional groups and be tied to certain conditions.

If you only have exempt supplies, the following applies:

1. You do not need to register the business in the VAT Register.
2. You do not have the right to deduct VAT on goods and services you purchase for the business.
3. You do not need to calculate VAT on the goods or services you sell.
4. You do not need to submit a VAT return.

If you combine running a business that is exempt from VAT with a business that is not exempt, you must calculate, report, and pay VAT for the part of the business that is not exempt.

Example of a VAT-exempt service

Teaching is generally exempt from VAT. Therefore, you do not need to calculate VAT on the invoice when you sell teaching services.

 

Zero-rating

Zero-rating means that the rules in the VAT Act apply to the supply, but the VAT rate is 0 percent (zero-rated). This means you do not need to calculate VAT for a specific good or service.

This means that:

1. The supply counts when you assess whether the threshold amount for registration in the VAT Register has been reached.
2. You can deduct VAT you have paid for goods and services (input VAT) used in the business when you are registered in the VAT Register.
3. Zero-rated supplies must be reported in a different section of the VAT return than supplies that are not zero-rated.

Zero-rating can apply to specific professional groups and be tied to certain conditions.

Example of zero-rating for VAT

Books sold to consumers are mostly zero-rated for VAT. However, you must still report such supplies in the VAT return.