Input VAT is the VAT a vendor incurs on goods and services it buys for its business. Provided the purchase is for taxable use and supported by a valid tax invoice, the vendor can deduct this input VAT from the output VAT it charges customers, paying SARS only the net amount.
What it means
Without a valid tax invoice, input VAT generally cannot be claimed, which is why the invoicing requirements matter so much in practice. Input VAT claimed in excess of output VAT in a period results in a refund from SARS rather than a payment.
Where it fits in
Payroll costs - salaries and wages - carry no VAT at all, so there is no input VAT to claim on the payroll bill itself. Input VAT relates only to taxable goods and services a business buys, not to remuneration it pays.
Key rules
- VAT paid on business purchases, claimable against output VAT.
- Requires a valid tax invoice to support the claim.
- Net of output VAT, it is reported on the VAT201.
- Salaries and wages carry no VAT, so payroll generates no input VAT.
