VAT for Hairdressers: Benefits and Common Questions Answered

What is VAT?

VAT (Value Added Tax) is a tax that businesses must charge or pay when selling or buying goods or services. Eg: In Denmark, a 25% VAT is added to the price of a product. A business must report both sales and purchase VAT.

How to Calculate Sales-VAT

Let’s say you need to earn approximately €270 for a service. To receive this, you need to add 25% VAT to the price (Using the danish 25% VAT as an example). In this case, that would be an additional €67.50. Therefore, the service should cost your customer €337.50 because you’ll need to pay that €67.50 in VAT to the tax authorities.

How to Calculate Purchase-VAT

You don’t need to calculate purchase VAT yourself. Purchase VAT must be clearly listed, no matter where you shop. For example, on our website, purchase VAT is shown in your cart and at checkout. If you’re a business buying internationally, VAT can be entirely deducted – meaning you won’t pay it – by providing your VAT number. Note that you won’t be able to deduct purchase VAT in your accounting for such transactions.

What Does it Mean to be VAT Liable as a Hairdresser?

As a hairdresser, being VAT liable means you must charge VAT on your services and products. At the same time, you have the right to deduct VAT from expenses related to your business. However, you still have to pay VAT.

Why Should it be Reported?

If your sales VAT exceeds your purchase VAT, you must pay the surplus sales VAT to the tax authorities. If your purchase VAT exceeds your sales VAT, you’ll receive a refund.

How Can Hairdressers Make Use of VAT Benefits?

If you’ve made a significant amount in sales and therefore owe sales VAT, you could invest in new equipment or furniture. This way, you pay your sales VAT and simultaneously acquire items that can improve your daily operations.

Benefits of VAT Registration

VAT registration allows hairdressers to deduct VAT from purchases, which can be a significant financial advantage. Additionally, it helps build professionalism and trust with customers.

Is There VAT on All Treatments?

VAT on specific treatments depends on local VAT rules. Some treatments may be exempt, especially if they have health-related purposes. It’s essential to consult your region’s specific VAT regulations. For standard hairdressing treatments, VAT will generally apply.