What is Input VAT?
Input VAT (input tax) is the value-added tax a VAT-registered business pays on the goods and services it buys for its operations. It appears on supplier invoices as a separate tax line. The business can usually reclaim this input tax from the tax authority, offsetting it against the output VAT it charges on its own sales — paying the tax authority only the net difference.
VAT is designed so that tax is collected at each stage of the supply chain but only on the value added. When you buy raw materials for €1,000 plus €240 VAT (at 24%), that €240 is your input tax. When you sell the finished product for €1,800 plus €432 VAT, that €432 is your output tax. You owe the tax authority €432 − €240 = €192 — tax only on the €800 of value you added. If input exceeds output in a period (common for start-ups or exporters of zero-rated goods), you typically receive a refund.
To reclaim input VAT you must hold a valid invoice showing the supplier’s VAT number, the tax rate, and the tax amount, and the purchase must be for a taxable business purpose — not entertainment or other blocked categories. The reclaim is made on the periodic VAT return (monthly or quarterly depending on jurisdiction and turnover). Mistakes here are the single most common cause of VAT penalties, so most small businesses either outsource VAT filing or use software that validates each invoice automatically before the return is submitted.
Example
A construction company buys €10,000 of building materials plus €2,400 input VAT at 24%. The same month it issues a sales invoice for €15,000 plus €3,600 output VAT. On its VAT return it declares €3,600 output, claims €2,400 input back, and pays the tax authority the net €1,200 — VAT effectively charged only on the value the business added.
Questions
What is the difference between input VAT and output VAT?
Input VAT is the tax you pay on business purchases and can reclaim. Output VAT is the tax you charge on your sales and must pay to the tax authority. Each VAT period you pay the authority the difference: output VAT minus input VAT.
Can I reclaim VAT on all business expenses?
You can reclaim input VAT on most purchases made for a taxable business purpose, provided you hold a valid VAT invoice. Certain categories — entertainment, passenger cars in some jurisdictions, and goods used for exempt supplies — are blocked or restricted. Invalid invoices are the most common reason reclaims are rejected.