Difference between exemptions and exceptions from VAT

On some goods and services, you do not calculate VAT. This is because they're either excepted or exempt from VAT.

Exception

By exception from VAT, we mean that the rules in the VAT Act do not apply to this turnover. This means that you do not calculate VAT for a particular item or service. The exceptions from VAT 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 do not register your enterprise in the VAT register.
  2. You're not entitled to deduct VAT on goods and services you purchase for the enterprise.
  3. You do 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 that's excepted from VAT and activity that's not excepted, you must calculate, report and pay VAT for the part of the activity that's not excepted.

Example of a service that's excepted from VAT

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

 

Exemption

By exemption from VAT, we mean that the rules in the VAT Act do apply to this turnover, but that the VAT rate is 0% (exempt). Therefore, you do not need to calculate VAT for a particular item or service.

This means that: 

  1. The turnover is included when you consider whether the amount limit for registration in the VAT register has been reached.
  2. You may be entitled to deduction for VAT that you've paid on goods and services (input VAT) for the business when you're registered in the VAT Register.
  3. Exempt turnover must be entered under a different item in the tax return for VAT than the turnover that's 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 normally exempt from VAT. However, you must still declare such turnover in the tax return for VAT.

 

Rate Value added tax

Value added tax (VAT) is payable on sales of most goods and services. On this page, you will find the standard rates for VAT. Some sectors and areas have specific rates for VAT. The general rate is 25%, food 15% and passenger transport, cinema tickets, rent of rooms, etc. is 12%.

Read more about rates or find rates for previous years here