Input Tax
Category: tax
VAT paid on business purchases, which can be deducted from output tax on sales.
Input tax is the VAT or GST a business pays on its purchases and business expenses, which can be reclaimed (credited) against the output tax collected on sales. Eligible input tax includes VAT on inventory purchases, business services, shipping costs, and platform fees. Reclaiming input tax is a key mechanism that prevents double taxation in a VAT system.
Examples
- • A German VAT-registered seller who pays 19% VAT on €10,000 of Amazon FBA fees can claim €1,900 as input VAT against their output VAT liability.
- • A UK seller importing goods pays 20% import VAT at customs, which is reclaimable as input VAT on their next VAT return.
- • VAT on business travel, professional services (e.g., accounting), and warehouse rent is typically reclaimable as input tax.