Are there exceptions to the value added tax liability for certain products?
March 16, 2023 | 40,00 EUR | answered by Emma Wagner
Dear tax advisor,
I have a question regarding the value-added tax liability for certain products. I run a small online business where I sell handmade products. So far, I have properly declared all my sales for tax purposes, but I am wondering if there are exceptions to the VAT liability for certain products.
I have heard that some goods may qualify for a reduced VAT rate or even be exempt from VAT altogether. Is this true and which products could be affected by this? I want to make sure that I can take advantage of all tax benefits to reduce my costs and make my business more profitable.
Could you please explain to me which products might be eligible for a reduced VAT rate or exemption? Are there specific criteria that need to be met to benefit from such exemptions? And how should I adjust my accounting to correctly take advantage of these tax benefits?
Thank you in advance for your help and support. I look forward to your expert advice to optimize my tax situation and further advance my business.
Sincerely,
Albrecht Siebert
Dear Mr. Siebert,
thank you for your inquiry regarding the VAT liability for certain products in your online business where you sell handmade products. It is commendable that you are taking care of properly taxing your sales and also looking for ways to take advantage of tax benefits to make your business more profitable.
Yes, there are indeed exceptions to VAT liability for certain products. In Germany, there are different VAT rates, namely the standard rate of 19% and the reduced rate of 7%. Products subject to the reduced rate include, for example, food, books, newspapers, magazines, some cultural events, and certain services such as hairdressing services. It is important to note that the exact list of products subject to the reduced rate is laid out in the VAT law.
Additionally, there are products that are exempt from VAT liability. This includes revenues from healthcare and nursing services, certain educational services, revenues from non-profit organizations, and certain financial services.
To benefit from the reduced VAT rate or exemption from VAT liability, certain criteria must be met. In many cases, it is important that the products or services you offer clearly fall into the relevant categories and meet the legal requirements. It is advisable that you consult with an experienced tax advisor to ensure that you comply with all relevant regulations.
Regarding your accounting, it is important that you record revenues from different product categories separately to apply the different VAT rates correctly. You should also ensure that you keep all necessary documents and receipts carefully to be able to prove, in case of a tax audit, that you have complied with tax regulations.
I hope this information is helpful to you and supports you in your tax situation. If you have any further questions or require detailed advice, I am at your disposal. Thank you for your trust and interest in my expert advice.
Best regards,
Emma Wagner, Tax Advisor
