Zero-Rated Supply
Category: tax
Taxable supplies charged at 0% VAT, allowing the seller to reclaim input tax.
Zero-rated supplies are goods and services that are technically taxable for VAT purposes but charged at a 0% rate. Sellers can still reclaim input VAT on costs related to zero-rated supplies. Common zero-rated items include exports, basic foodstuffs in some countries, and children's clothing in the UK. This treatment ensures exports are tax-free while preserving the right to recover input tax.
Examples
- • UK exports of goods to non-UK destinations are zero-rated (0% VAT), and the seller can reclaim all input VAT on related costs.
- • Basic food items (bread, milk, vegetables) are zero-rated in the UK, meaning no VAT is charged but input VAT on business expenses is still reclaimable.
- • An EU seller exporting goods outside the EU charges 0% VAT and can reclaim the VAT paid on production and shipping costs.