Concept Definition
What is input VAT?
Input VAT is the VAT a business pays on its purchases of goods and services. VAT-registered businesses can reclaim input VAT paid on business expenses by offsetting it against output VAT collected on their sales. The balance is reported on the periodic VAT return.
How is input VAT recovered?
Input VAT is recovered by deducting it from output VAT on the periodic VAT return. If input VAT exceeds output VAT in a period, the business has a VAT repayment claim which can be refunded or carried forward.
Frequently Asked Questions
- What evidence is needed to reclaim input VAT?
- A valid VAT invoice from the supplier is the primary evidence required. The invoice must show the supplier's VAT number, the tax amount, and meet all mandatory invoice content requirements under the applicable VAT law.
- Is input VAT always fully recoverable?
- No. Input VAT recovery is restricted for purchases related to exempt activities, private use, entertainment, and certain motor vehicles depending on jurisdiction rules. Partial recovery applies where purchases serve both taxable and exempt activities.