Let's say I'm from the EU, and I sell something to somebody in the USA. Did the sale include "no VAT" or is the VAT 0%?

Side note: I'm from an IT background and I'm trying to figure out if a transaction always needs to have an associated VAT amount (even if it's 0), or is it really non existent in this case from an accounting / legal point of view?

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    This sounds like a question for programmers.stackexchange.com, as it's mostly a "how should I design my software" question. From a finance perspective, what's the difference? – user27684 Nov 22 '15 at 19:00
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    there are VAT exempt transactions so you need to add that case, or maybe you just program it as zero for your own sanity – CQM Nov 22 '15 at 19:16
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    @MikeHaskel It's not exactly a question about how to design it, but what is "correct" - I want to completely understand why I'm doing it this way. So I absolutely know how, but I want to know why. – Quasdunk Nov 22 '15 at 19:48
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    @Quasdunk: In that example, you explicitly mentioned two interpretations: either the person processing the form thinks the person who filled it out has zero kids, or they think they declined to state how many kids they have. Those are different because in one case you know how many kids they have and in one you do not. In your VAT example, what do you intend the two interpretations to be? You say it could be "VAT is not applicable", but what is the functional difference between that and 0% VAT? You don't appear to mean that the VAT rate is unknown (as in your children example). – BrenBarn Nov 22 '15 at 21:38
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    FWIW, in Canada, we have a distinction between GST/HST "exempt" goods vs. "zero-rated" goods. I would imagine there may be a similar distinction for VAT, because even though both mean no tax is charged to the customer, there is a difference in how input tax credits work. – Chris W. Rea Nov 23 '15 at 1:08

It's complicated and if you have to deal with this professionally, you should seek advice from someone (accountant/lawyer) who knows the system.

There is such a thing as a 0% VAT rate (but not in every EU country). If you are selling goods taxed at 0%, you are entitled to reclaim the VAT you paid on your supplies and have to keep track of it accordingly. More information on this from HM Revenue & Customs in the UK.

There is also such a thing as being VAT-exempt. In that case, there is usually some other specific legal mention to include on all invoices. If your whole business is outside the VAT system (e.g. very small businesses and non-profit organisations), you do not itemize it on your own invoices, pay VAT on your supplies and cannot reclaim it. If you sell goods to such a business, you charge them VAT just like you would in a transaction with a private person.

So both exist and are distinct.

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