Input tax

Input tax is the amount of Value Added Tax (VAT) that a business pays when purchasing goods or services needed for its operations. For example, if a company buys materials and pays VAT on those purchases, that VAT is considered input tax. Businesses can usually recover this amount from the tax authorities when they file their VAT returns, effectively reducing their overall tax liability. This system ensures that VAT is only paid on the value added at each stage of production and sale, preventing tax cascades and promoting fair taxation.