Zero-Rated Goods

DEFINITION of 'Zero-Rated Goods '

Products on which a value-added tax (VAT) is not levied in countries that use a VAT. Examples of goods that may be zero rated include many types of food and beverage, exported goods, donated goods sold by charity shops, equipment for the disabled, prescription medications, water and sewage services, books and other printed publications, children's clothing, and financial services.

BREAKING DOWN 'Zero-Rated Goods '

Zero-rated goods can save consumers a significant amount of money. In the United Kingdom, for example, the standard VAT rate levied on most goods is 17.5% and the reduced rate is 5%. However, because the VAT is a hidden tax, which means it is already included in the price of goods, the consumer may be unaware that a good is zero rated. A fourth category of goods - exempt goods - also carries no VAT.



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