The scope of the exemptions is not always easy to define. For example, scheduled bus services are VAT-exempt, whereas tourist bus services are not. Similarly, some healthcare treatments are VAT-exempt, while others are not, due to either a lack of medical relevance or the provider’s lack of accredited qualifications.
It may seem intuitive for a business to seek VAT exemption for its turnover. However, whether this is beneficial depends largely on the business’s customer base and cost structure.
PrivatRevision can assist in determining whether a service qualifies as VAT-liable or VAT-exempt. We can also advise businesses on how to avoid VAT liability or become VAT-liable, depending on their specific interests.
To claim VAT deductions on expenses, those expenses must relate to VAT-liable activities. As a result, many businesses that are otherwise VAT-exempt may, in fact, benefit from having a VAT-liable element. For example, a psychologist providing services to a corporate client (who can reclaim input VAT) may be interested in those services being treated as VAT-liable. This allows the psychologist to claim VAT deductions on a portion of their own expenses.
When a business carries out both VAT-liable and VAT-exempt activities, it must calculate VAT deductions according to the pro-rata principle. Under this system, input VAT may only be deducted in proportion to the share of turnover that is VAT-liable.
For real estate investors, VAT planning can have substantial financial implications—particularly in determining whether the supply of real property or the leasing of commercial premises should be structured as taxable or exempt, depending on the expected cost structure.
Let PrivatRevision’s VAT experts guide you through your options if you operate a wholly or partially VAT-exempt business or if you have considerations regarding VAT liability or exemptions.
