Years ago it was quite unpopular physical persons to be registered under the Value Added Tax Act (VAT Act), but a legal requirement for natural persons to get VAT registered under certain conditions does exist. This used to be so unpopular and many individuals who were subject to obligatory VAT registration did not do this which led to tax penalties.
Under the VAT Act, any taxable entity is a subject to obligatory VAT registration upon certain condition or a voluntary one. I.e. the first step which should be made is to make sure whether the person, who is subject on an eventual VAT registration, is a taxable entity.
According to the VAT Act, a taxable entity is any entity which performs independent economic activity, regardless of the purposes and results from the said activity. In other words, all natural and legal persons who perform business transactions, i.e. engage with business deals, are included. A “business” is a broad definition that covers almost all aspects of the economy (trade, manufacturing, professional services, transportation services, freight, construction, etc.). Activities, when performed under an employment contract or a management agreement, are excluded from the scope when defining if a person is a taxable entity.
Practically this means that if a natural person performs business transactions, then it is a subject for VAT registration for its business activities. The following listed sample activities below represent non-comprehensive list of activities, leading to a possible obligation for VAT registration to individuals (assuming that they perform the activities under contracts, other than employment or management agreements):
- Consulting services: legal and lawyer services, accounting services, independent financial audit, technologists’ services, project management and more.
- Rental: movable property rent (automobiles, machinery, etc.), real estate rent
- Property sale: movable property (goods, production, etc.), real estate
- Technical services: hardware and software maintenance, software programming services, etc.
- Brokerage services
These activities are often performed under civil (consultancy) contracts.
It must be noted that the purpose of the article is just to confirm that natural persons can also be VAT registered and the topic is generally reviewed in principle (without providing detail analysis of the exact registration requirements under the VAT Act). Each concrete practical case must be analyzed individually, so that it is confirmed if the individual is a taxable entity and what the conditions for eventual VAT registration include (for example, certain transactions are excluded from the turnover for compulsory VAT registration).