GlossaryEN1 min readUpdated: Jun 26, 2026

VAT-exempt service

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Last updated: 26 June 2026Published: 27 January 2026

Source: https://www.gesetze-im-internet.de/ustg_1980/__4.html

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Definition & Explanation

A VAT-exempt service is a supply that falls outside the charge to value-added tax by explicit statutory exemption: the provider issues the invoice without VAT and cannot pass the tax on to the customer. In transport and logistics, the category typically covers certain international freight activities, insurance intermediation, and financial services where specific conditions are met. The critical practical consequence is that exemption without the right to deduct input tax forces the provider to absorb the VAT paid on related purchases as an irrecoverable cost – a fundamental difference from zero-rated supplies such as exports, where the supplier recovers input tax in full. Freight forwarders must classify each service correctly, because misidentifying an exempt service as taxable, or vice versa, affects invoicing obligations, VAT returns, and the company's overall tax exposure. The precise scope of exemptions varies by jurisdiction.

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VAT-exempt service

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restriction/limitation of the right to deduct input tax (VAT)

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