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What Is VAT Input?

What Is VAT Input? thumbnail
Businesses in the European Union must record their input VAT.

Value Added Tax is levied by countries within the European Union on purchases of goods and services. Each country fixes the VAT rates within their territory.

  1. Input VAT

    • Input VAT is the amount of tax that a business has paid for other goods and services that are destined for use in their business activities.

    Right to Deduct Input VAT

    • Businesses in the European Union generally have the right to deduct input VAT from their VAT liability to the corresponding national tax agency. Exceptions to this include micro-businesses that are not required to register for VAT, businesses who plan to use the goods or services for a VAT-exempt activity and VAT-exempt entities such as banks and insurance companies.

    Input VAT Refund

    • If a business has spent more on input VAT than it has collected in output VAT from customers, the business may claim an input VAT refund for the difference from the appropriate national tax agency.

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