Input VAT vs. Output VAT: How BIR VAT Credits Work in the Philippines

Output VAT is the 12% value-added tax a VAT-registered business charges on its own sales; input VAT is the VAT it already paid on its own qualifying purchases. The difference between the two — not either figure alone — is what determines whether a business owes the BIR money for the quarter or carries a credit forward. Confusing the two, or the direction they’re credited in, is one of the more common VAT-return mistakes.

This guide covers how input and output VAT work under NIRC Sections 106 and 110, and what happens when one exceeds the other.

What is output VAT? #

Output VAT is the tax a VAT-registered person charges and collects on their own sale, barter, or exchange of goods, properties, or services, at the standard 12% rate on the gross selling price or gross receipts, under NIRC Section 106. It’s the VAT a business adds to its own invoices and official receipts — the amount the customer ultimately pays on top of the selling price, which the seller then owes to the BIR, net of any creditable input VAT.

What is input VAT? #

Input VAT is the value-added tax a VAT-registered person already paid or incurred on a local purchase or importation used in their own trade or business, and it’s creditable against that business’s output VAT, under NIRC Section 110. It covers VAT paid on goods bought for resale, materials that go into a finished product for sale (including packaging), supplies used in the course of business, and capital goods on which depreciation or amortization is claimed — provided the purchase is properly documented.

Input VAT is only creditable when:

• It’s evidenced by a proper VAT invoice or official receipt issued under NIRC Section 113
• The purchase is genuinely used in the VAT-registered person’s own trade or business, not a personal or unrelated expense
• The corresponding output VAT relationship is traceable — the credit exists because a supplier already charged VAT on that transaction

How do input VAT and output VAT interact each quarter? #

Every taxable quarter, a VAT-registered business nets its accumulated output VAT (tax charged on its sales) against its accumulated input VAT (tax paid on its qualifying purchases) to arrive at either an amount payable or a carry-forward credit.

A worked example: A trading business has P600,000 in output VAT for the quarter (from its own sales) and P450,000 in input VAT (from its own purchases and imports). It owes the BIR the P150,000 difference. If, instead, the same business had P650,000 in input VAT against P600,000 in output VAT, the P50,000 excess input VAT wouldn’t be refunded on the spot — it carries forward and reduces the VAT payable in the following quarter.

How does this connect to RELIEF SLSP reporting? #

The same sales and purchases that generate output and input VAT are exactly what the RELIEF Summary List of Sales and Purchases (SLSP) reports to the BIR once a taxpayer crosses the applicable thresholds under RR No. 8-2002 — the Summary List of Sales reflects the transactions behind a business’s output VAT, and the Summary List of Purchases reflects the transactions behind its input VAT. Keeping those two listings consistent with the VAT return itself is part of what SLSP is designed to cross-check.

Frequently asked questions #

What is output VAT? #

Output VAT is the value-added tax due on a VAT-registered person’s sale, barter, or exchange of goods, properties, or services, computed at 12% of the gross selling price or gross receipts, under NIRC Section 106.

What is input VAT? #

Input VAT is the value-added tax a VAT-registered person paid or incurred on the local purchase or importation of goods, properties, or services used in their trade or business, which is creditable against their output VAT under NIRC Section 110.

What happens if output VAT exceeds input VAT for a quarter? #

If output VAT exceeds input VAT for a taxable quarter, the excess is the VAT payable, and the VAT-registered person must remit that difference to the BIR.

What happens if input VAT exceeds output VAT for a quarter? #

If input VAT exceeds output VAT for a taxable quarter, the excess input VAT is not immediately refunded — it is carried over and credited against output VAT in the succeeding quarter or quarters, under NIRC Section 110.

Does every purchase generate creditable input VAT? #

No. Input VAT is only creditable when it is evidenced by a proper VAT invoice or official receipt issued under NIRC Section 113, and when the purchase is used in the course of the VAT-registered person’s trade or business — such as goods for resale, packaging materials, business supplies, or capital goods subject to depreciation.

Summary #

Output VAT is what a VAT-registered business charges on its own sales; input VAT is what it already paid on its own qualifying purchases, and the two are netted each quarter under NIRC Sections 106 and 110 — an output-VAT excess is remitted to the BIR, while an input-VAT excess carries forward rather than being refunded outright. Because the same sales and purchases behind these figures are what RELIEF SLSP reports, keeping the two reconciled is part of routine VAT compliance. See How to Convert Excel to BIR DAT File for RELIEF SLSP for the SLSP side of this, and VAT vs. Percentage Tax for whether VAT applies to your business at all.