GlossaryEN1 min readUpdated: Jun 19, 2026

VAT tax exemption

VAT exemption removes the tax charge from specific transactions by law, rather than reducing the rate to zero.

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Last updated: 19 June 2026Published: 27 January 2026

Source: https://ec.europa.eu/taxation_customs/business/vat/eu-vat-rules_en

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Definition & Explanation

VAT exemption removes the tax charge from specific transactions by law, rather than reducing the rate to zero. The clearest example in trade is export: once goods leave EU VAT territory, the supply is exempt. The same applies to intra-EU supplies to VAT-registered businesses and, in many cases, to international freight transport services. The critical practical distinction is between exemption and zero-rating: a zero-rated supply still allows the supplier to recover input VAT, whereas a genuinely exempt supply does not. Freight forwarders and customs agents encounter this distinction regularly, as it directly affects invoicing, cash-flow planning, and the deductibility of upstream costs.

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VAT tax exemption

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Related Terms

VAT-exempt service

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

USMCA

VAT-exempt delivery

Taxable supply

Restriction on input VAT deduction

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