Zero-rated value-added tax (VAT) is applicable to the export of both services and goods, but they are different in several ways.
Where the zero-rated VAT applies, the system offers to a business a VAT credit paid to another VAT registrant (input VAT) even though it is not required to charge VAT from its customers (output VAT). Therefore, the business normally prefers the zero-rated VAT to the normal VAT, in which it has to charge output VAT from the customers and deal with administrative and marketing burdens.
The zero-rated VAT also offers advantages over the VAT exemption, which does not allow the business to credit any input VAT. Unfortunately, a tax issue always arises wherever privileges lie. The key concern for the zero-rated VAT involves the definition of export of services and relevant conditions, because it is harder to pin down than the straightforward export of tangible goods.
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