What business operations are exempted from VAT?
Basically, all sales of goods and services taking place in the conduct of business are subject to VAT. However, the Value Added Tax Act contains detailed provisions on the categories of sales that are exempted from VAT.
The exempted categories include:
- health and medical services
- social services
- general education, vocational training, university-level teaching and basic artistic teaching
- financial services and insurance services
- certain performing artists’ fees
- sales and rental of real estate and apartments
- general postal services
- certain other goods and services (such as organisation of lotteries).
The above activities do not require VAT registration but in some cases you can register for VAT voluntarily (for example, certain performance fees and transfer of a right to use real estate). If you are not VAT-registered, you cannot add VAT to the goods and services you sell, nor can you deduct the VAT included in the purchases you make.
Please note, however, that there are also VAT-exempt sales for which VAT deductions can be claimed if purchases relating to them have been made. These sales are called “zero-rated”. Examples of zero-rated activities include international trade in goods and services.Note that zero-rated activity does not mean the same as VAT-exempt activity, which is discussed on this page.