Difference between exemptions and exceptions from VAT

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You must not calculate VAT on some goods and services. The rules for this are laid down in the VAT Act.

Read more about the VAT rates

What is an exception from the VAT obligation?

‘Exception from VAT’ means that you shall not calculate VAT for a particular item or service. The rules in the VAT Act do not apply to this turnover. The exceptions from VAT obligation may apply to a particular occupational group and be tied to certain conditions.

If you only have turnover of this type, the following will apply:

  1. You must not register the enterprise in the VAT Register.
  2. You are not entitled to deductions for VAT on goods and services you purchase for the enterprise
  3. You should not calculate VAT on goods and services that you sell
  4. The turnover should not be reported in the tax return for VAT

If your business involves both activity which is excepted from the VAT obligation and activity which is not excepted, you must calculate, report and pay VAT for the part of the activity that is not excepted .

Example of a service that is excepted from VAT

Teaching is generally excepted from VAT. You should therefore not add VAT to the invoice if you run a teaching business.

What is an exemption from the VAT obligation?

‘Exemption from the VAT obligation’ means that you do not need to calculate VAT for a particular item or service. The difference is that the turnover is covered by the VAT Act.

This means that:

  1. The turnover must be taken into account when you consider whether the threshold amount for registration in the VAT Register has been reached.
  2. You may be entitled to a deduction for VAT you have paid on goods and services (input VAT) when you are registered
  3. The turnover must be entered under a different item in the tax return for VAT (the VAT report) than turnover which is not exempt

The exemptions may apply to a particular occupational group and be tied to certain conditions.

Example of an exemption for VAT

Books that are sold to consumers are excepted from VAT in most cases. However, you should still declare such turnover in the tax return for VAT.

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