Input VAT deduction
In one sentenceThe right of a registered business to deduct the VAT on its taxable purchases from the VAT on its sales, provided there is a valid tax invoice and the purchase is used in a taxable activity.
Simply put
Deduction is what keeps VAT from piling up on the business: you pay it to your supplier and then recover it by deducting it from what you collected from your customers.
Its basic conditions: you are registered, you keep a tax invoice in your name and with your number, and the purchase is for a taxable activity.
Worked example
An auto parts store collected output VAT of 30,000 SAR in the quarter, and paid VAT of 12,000 SAR on its purchases with valid invoices.
Output VAT30,000 SAR
Deductible input VAT12,000 SAR
Calculation30,000 − 12,000
VAT payable18,000 SAR
Formula: VAT payable = output VAT − deductible input VAT
Don't confuse it with
VAT refundDeduction subtracts inputs from outputs in the return, while a refund arises when inputs are higher, so you claim the difference in cash or carry it forward.
in FullScreen ERP
The purchases module calculates the deductible VAT on every purchase invoice. Purchasing and suppliers