Entities and individuals not liable to pay or collect VAT include small businesses with taxable turnover below national registration thresholds, providers of exempt goods/services (e.g., healthcare, education, financial services, charitable activities), and entities in countries without a VAT system, such as the United States. These exemptions are often based on local regulations and, in the EU, include specific thresholds for small businesses.
Products that shouldn't be taxed are considered to be exempt from VAT. Businesses, charities, and other types of organisations can also be considered to be exempt from VAT. A business is VAT-exempt if they only sell VAT-exempt products, or if they're not involved with taxable 'business activities'.
1. Persons whose gross annual sales and/or receipts do not exceed P 3,000,000 and who are not VAT-registered persons. 2. Domestic carriers and keepers of garages, except owners of bancas and owners of animal-drawn two wheeled vehicle.
Not all sales are liable to VAT. Some traders are not registered for VAT because their businesses have sales (turnover) below the VAT registration threshold and so they cannot charge VAT on their sales (unless they decide to register voluntarily – see the heading below: Voluntary registration).
Using invoices, each seller pays VAT on their sales and passes the buyer an invoice that indicates the amount of tax paid excluding deductions (input tax). Buyers who themselves add value and resell the product pay VAT on their own sales (output tax).
There is no general relief from VAT for people who are disabled or chronically ill. However, a zero rate can be applied to certain supplies to disabled people for their domestic or personal use – that means, no VAT is charged. People aged 60 or over may also be eligible for some VAT reliefs.
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.
Yes, VAT is compulsory to pay on applicable goods and services. Businesses are required to collect VAT from customers and remit it to the government.
The VAT threshold for 2025-26 is £90,000. The government announced this increase in last year's Spring Budget, with the new threshold coming in from 1 April 2024. The VAT registration threshold is set by HMRC every year – but it remained unchanged from 2017-18 until increasing from £85,000 in 2024-25.
VAT is charged on things like:
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.
Businesses must register for VAT whether they are incorporated or are sole traders, whether they pay corporation tax or not. Businesses with revenue below this threshold may also benefit from registering for VAT. VAT registration allows businesses to reclaim VAT on goods and services purchased by your business.
Firstly, it is worth noting that you must not charge VAT if your business is not registered for VAT. However, VAT-registered businesses must charge VAT on their taxable supplies of goods and services and can reclaim the VAT they have paid that relates to the supplies on which they have charged VAT.
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.
Frequently asked questions
The incontinence products that are VAT exempt include incontinence pads, incontinence pants, belted undergarments & shields, bariatric products, bed pads and chair pads. Toilet aids such as urinals, bed pans, commodes, raised toilet seats, toilet aid frames and mobility handrails are also VAT exempt.
Am I eligible for VAT relief? Yes, if you have dementia or are considered chronically sick or disabled, and you are buying the product for your personal use.
Disabled people and those with chronic illnesses can purchase stairlifts with 0% VAT (completely VAT-free), while people aged 60 and over may qualify for a reduced VAT rate of just 5% instead of the standard 20%.
SECTION 4.105-1. Persons Liable. – Any person who, in the course of his trade or business, sells, barters, exchanges or leases goods or properties, or renders services, and any person who imports goods, shall be liable to VAT imposed in Secs.
You could receive a Notice of Enforcement, which gives HMRC the power to seize company assets without having to petition the court. If you continue not to pay, HMRC can issue a Winding Up Petition against your business, which could lead to its Compulsory Liquidation.