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VAT exemption for own business

When are you exempt from VAT when doing business?

When setting up your own business, you come across a lot of new information. Whether you are liable for VAT or entitled to a VAT exemption is part of it. Here you can read exactly what the VAT exemption entails and what its pros and cons are. 

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VAT explained

VAT taxes the value added at each step in the production process. This may sound a bit vague, so here you can read how VAT works in practice.

In any case, as a self-employed person, you will come across VAT so you better know how it works and whether you yourself are liable for VAT. So make sure to read on.

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Are you liable for VAT?

In most cases, you are liable for VAT as an entrepreneur: this means that you must charge VAT on your invoices to customers and pay the tax in turn to the government. There are exceptions, which are listed below, but the basic rule is that you are liable for VAT.

Exemption from VAT obligation

Small businesses with a maximum annual turnover of €25,000 can opt to be exempt from VAT. This means that they don't have to charge their customers VAT. Self-employed persons as a secondary occupation often avail themselves of this.

The advantage: you don't have to charge VAT on your invoices, which greatly simplifies your bookkeeping.

The disadvantage: you don't charge VAT, so you can't deduct it either. You are an ordinary consumer paying the full price for all of your purchases.

There are further exceptions that don't pay VAT, such as some liberal professions and professions of a social or cultural nature.

An overview:

  • Medical activities of a non-aesthetic nature performed by doctors, dentists or physiotherapists.
  • Activities of midwives, nurses, and healthcare professionals
  • Activities of recognised and regulated paramedical professions
  •  e.g. dieticians, speech therapists, podiatrists, ...
  • Some socio-cultural activities
  • hospital and medical care
  • transport of sick or injured people in specially equipped transport vehicles
  • care for the elderly
  • youth care
  • care for the disabled
  • educational activities
  • rental of books, periodicals, and cultural items (libraries)
  • organisation of exhibitions, concerts and theatrical, ballet and film performances
  • Selling, leasing, and letting of immovable property
  • Insurance activities
  • Financial activities, e.g. granting of loans

If you want to be sure whether or not you are liable to pay VAT, please ask.

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VAT exemption in practice

What if you are entitled to a VAT exemption?

  • Your company generates turnover without collecting VAT.
  • As a business, you are not allowed to deduct VAT on purchases.
  • You are not required to submit a periodic VAT return.

Would you like to make use of the exemption scheme? 

If so, please bear these obligations in mind:

  • Your invoices must contain the following statement: "Special exemption scheme for small enterprises".
  • You must submit a customer list by 31 March each year.

Please note that certain activities are excluded from the exemption scheme, such as tobacco product retailing, fish markets, construction work, sales of new buildings, etc.

It should be noted that, since 1 July 2016, you are no longer required to submit an annual customer, if your business is covered by the exemption scheme for small businesses.

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