Explained
If output exceeds input you pay the difference; if input exceeds output you have a credit to reclaim or carry forward, depending on your country’s rules. Deducting input tax depends on holding a valid tax invoice from a registered supplier — an invoice missing its required details is tax you cannot deduct. Rates and details differ by country, and this is general knowledge rather than tax advice.
Example
Output tax of 15,000 and input tax of 9,000 in a month: 6,000 is due.
Related terms
- Value added tax (VAT)Value added tax (VAT) is an indirect tax charged on goods and services at each stage of sale and borne by the final consumer.
- Tax invoiceA tax invoice is issued by a VAT-registered seller and shows the value of the goods or services, the VAT on them and the seller’s tax number.
- Tax registration numberA tax registration number is the identifier a tax authority gives a VAT-registered business, printed on its invoices.