VAT-excluded items generally fall into two categories: exempt (no VAT charged, no input tax claimable) and zero-rated (0% VAT charged, input tax can be reclaimed). Key exclusions include basic food, medicines, education, healthcare, financial services, and exports.
Healthcare: Medical services, hospital care, and the supply of certain medical products may also be exempt from VAT. Financial services: Many financial services, like insurance and banking, are VAT-exempt. Charitable activities: Donations and activities carried out by registered charities may be exempt from VAT.
When not to charge VAT
If something is exempt from VAT, it's usually because the product is considered to be an essential good or service. HMRC has a full list of VAT-exempt products, but some of the main goods and services that are exempt from VAT include: Sporting activities and physical education. Education and training.
Common Types of VAT Exempted Supplies
To get the product VAT free your disability has to qualify. For VAT purposes, you're disabled or have a long-term illness if: you have a physical or mental impairment that affects your ability to carry out everyday activities, for example blindness. you have a condition that's treated as chronic sickness, like diabetes.
What items are eligible for a VAT refund? Typical Recoverable Expenses are:
You cannot reclaim VAT for: anything that's only for personal use. goods and services your business uses to make VAT -exempt supplies. the cost of entertaining or providing hospitality to people you do business with (for example theatre or sports tickets)
Eligibility: Typically, businesses with annual gross sales or receipts below the VAT threshold—set at PHP 3 million as of 2025—are classified as non-VAT. Tax Obligation: These entities remit a 3% percentage tax to the Bureau of Internal Revenue (BIR) rather than the 12% VAT, streamlining their compliance process.
In adverts, catalogues and price lists
If they're for: the general public only, they'll show you a price including VAT. businesses as well as consumers, they might show the price with VAT and without. businesses only they do not usually include VAT , which is charged on top of the price shown.
Agricultural products, tuition fees, lending operations, real estate, books, transportation and other necessities are typically VAT-exempt transactions.
Shipping your purchases home directly from the retailer is another way to avoid paying VAT, but the added cost may outweigh any savings. You can try to get your VAT refund through the mail but the process takes much longer and can be unreliable. Most people submit their requests at the airport on their way home.
Certain goods and services must be exempt from VAT (for example, postal services, medical care, lending, insurance, betting), and certain other items are exempt from VAT by default, but states may opt to charge VAT on them (such as land and certain financial services).
VAT exempt supplies include:
Exempt goods and services include many basic necessities such as food items, healthcare, and educational services. Unlike zero-rated goods, businesses dealing with exempt goods cannot claim a credit for the GST paid on inputs used to make these products.
Navigating VAT obligations can be particularly complex for online businesses, especially those selling across borders. Common mistakes—such as failing to register in the correct countries, applying the wrong VAT rates, or missing important filing deadlines—can lead to serious financial and legal consequences.
Some examples of VAT-exempt sectors include:
To receive VAT exemption you need to have a long term illness or disability. For example, a physical or mental impairment which affects you being able to undertake activities, a condition which is considered to be a chronic sickness, such as disabilities or you are terminally ill.
Office supplies: businesses can deduct VAT on office supplies such as stationery, printing and office equipment, and software licences. Business operations: VAT-deductible items for business operations include rent for business premises, utilities for business use, and business insurance premiums.
Usually, your purchase must be over a certain amount in order to qualify for a VAT refund. In the EU, for example, you have to buy at least 175 euros worth of stuff in a shop. European Commission: Taxation and Customs Union. Guide To Vat Refund For Visitors To The EU.
Frequently asked questions
If you're an exempt business you don't have to register for VAT, but you can't claim it back, even if you buy goods or services that you do pay it on. What this means for your business: You don't include VAT in the price of any items for sale. You can't reclaim VAT on exempt items you buy.
(You are considered an exporting tourist when you purchase goods and take them with you home, therefore becoming eligible for a refund of the VAT that you paid during the purchase.)
At the Merchant
Note that you're not supposed to use your purchased goods before you leave Europe. (Some retailers, particularly those in Scandinavia, will staple and seal the shopping bag to keep you from cheating.) If the store ships your purchase to your home, you won't be charged the value-added tax.