As a self-employed person, you usually have to charge VAT to your customers and remit it to the tax authorities. But there are cases where you are exempt from VAT. This can be advantageous, but it does come with certain rules and restrictions. In this article, we will tell you when you are VAT-exempt as a self-employed person, which types there are and what you need to consider.
When are you liable for VAT as a self-employed person?
Most self-employed people are required to pay VAT (VAT liable). This means:
- You charge VAT on your invoices
- You file quarterly (or monthly/yearly) VAT returns
- You can recover VAT on business expenses
But there are exceptions. In fact, in some cases you do not have to charge VAT. This is called a VAT exemption. We will be happy to tell you more about it.
What is a VAT exemption?
With a VAT exemption, you do not have to charge VAT to your customers. As a result, you usually do not file a VAT return. The disadvantage of this, however, is that you then also cannot recover VAT on your business expenses. There are two ways you can be VAT-exempt as a self-employed person.
- You provide a service that is exempt from VAT. Think of a service in the healthcare, education or financial sector
- You use the small business allowance (KOR) scheme (we'll tell you more about that later).
Advantages
- You do not file a VAT return
- Your administration is simpler
- You are more interesting for private customers (because you do not charge VAT)
Cons
- You cannot recover VAT on business expenses or investments
- You appear less professional in sectors where VAT is normal
- It is less advantageous if you incur a lot of expenses or have many business customers
Exempt industries and business activities
Certain professions and sectors are automatically exempt from VAT. You don't have to apply for anything then for this. You just fall under it as soon as you provide that service. These include:
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Caregivers: Think GPs, physiotherapists, psychologists and midwives. It also includes some alternative therapists (if recognised).
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Education: Do you provide tutoring or courses in school subjects or work at a recognised educational institution? If so, this is often exempt from VAT.
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Arts & culture: Artists, writers and some cultural institutions do not have to charge VAT if they meet the conditions.
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Financial services: Mortgage advice, insurance and investments are covered by the VAT exemption.
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Childcare & religion: Childcare organisations and mental service providers are also usually exempt.
Please note that there may be additional conditions per industry. So, are you not sure whether your service is VAT-exempt? Then ask your accountant or check the website of the Tax Office..
VAT exemption for small businesses through the KOR
The small business scheme (KOR) is a VAT exemption for entrepreneurs with an annual turnover of up to €20,000 (excluding VAT). Good to know. If you use the KOR:
- Do you no longer charge VAT to your customers
- Don't claim back any more VAT
- Don't file a VAT return anymore
This scheme applies for a minimum of three years (or until you exceed the turnover limit). You do need to actively register with the Tax Office. You can read more details on this in our other article on the small entrepreneur scheme (KOR).
How do you put VAT exemption on your invoice?
If you are exempt from VAT, indicate this clearly on your invoices. For example:
- "VAT exempt under section 11 of the Sales Tax Act"
- Or: "This service is VAT-exempt; no VAT will be charged"
So you don't put a VAT percentage or amount on the invoice, but you do mention the total amount you charge.
To apply for VAT exemption or not?
VAT exemption can be a convenient scheme, but it is not the right choice for every entrepreneur. If your service or profession falls within the exempt category, you don't need to apply for anything.
Do you want to use the KOR? Then you have to apply for it with the Tax Administration, either through their portal or in writing. Make sure you apply at least four weeks before the start of a new quarter. And then keep in mind that the VAT exemption is not always advantageous (especially if you make a lot of investments or have many business customers). Do the math beforehand to see if it is advantageous for you.
