Back to knowledge base
Taxes
VAT exemption vs. 0% rate: what's the difference?
Written by Ilias3 min read
VAT exemption and the 0% rate sound the same: in both cases you charge your client no VAT. Yet there's an important difference that determines whether you can reclaim your own VAT. Many entrepreneurs confuse this. This article explains the distinction and why it matters.
What does the 0% rate mean?
With the 0% rate you charge your client no VAT, but you remain a VAT entrepreneur. That means you can still reclaim the VAT on your own costs and investments. The 0% rate applies to, among other things, export to countries outside the EU and certain international supplies.
What does a VAT exemption mean?
With an exemption you also charge no VAT, but you fall outside the VAT system for those services. The consequence: you can't reclaim the VAT on your costs. Exempt are, for example, certain services in healthcare, education and the financial sector.
Why does the difference matter?
The difference lies entirely in the input tax. With the 0% rate you get your paid VAT back, with an exemption you don't. For an exempt entrepreneur the VAT on costs is therefore a real cost. That can make a significant difference to your margin, especially if you purchase or invest a lot.
How do you know what applies to you?
Whether you fall under the 0% rate, an exemption or the normal rate depends on your service and your clients. Applying it incorrectly can lead to additional assessments or missed refunds. If in doubt which category your work falls into, have it checked so you apply the correct treatment.
This article provides general information based on the rules known for 2026 and does not replace personal tax advice. For your specific situation, we're happy to take a look with you.
Looking for a bookkeeper?
Schedule a no-obligation call and find out what Fiscly can do for your business.
Ilias
