ACCA Advanced Taxation (ATX) Practice Exam

Which of the following is NOT an example of exempt supplies from VAT?

1. Financial services

2. Telecommunications services

3. Insurance

4. Postal services

The correct answer is: Telecommunications services

Telecommunications services are generally considered taxable supplies under VAT regulations, as they do not meet the criteria for exemption. Exempt supplies are those that do not charge VAT, allowing businesses to make certain types of sales without VAT implications; these typically include financial services, insurance, and postal services. In the context of VAT, financial services refer to activities like banking and investment, which are exempt to encourage these types of economic activities. Similarly, insurance services are also exempt because they represent risk management rather than a good or service in the traditional sense. Postal services, particularly when provided by national postal authorities, are also exempt due to their essential role in communication and parcel delivery. On the other hand, telecommunications services involve the provision of electronic communications and are usually subject to VAT as they are considered commercial transactions where consumers receive a definite service in exchange for payment. Therefore, telecommunications services are not exempt and make option B the correct choice as the one that does not represent exempt supplies.