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Understanding VAT Input vs VAT Output

A simple guide for business owners and managers 

Value-Added Tax (VAT) is a key part of doing business in South Africa if your business is registered for VAT. At its core, VAT is a tax on consumption, but for businesses it works through a system of credits and liabilities — that’s where VAT input and VAT output come in. 

 

What is VAT Output? 

VAT Output is the VAT your business charges on sales of goods or services to your customers. 

  • Example: You sell consulting services for R10 000 + 15% VAT → your customer pays R11 500. 
  • The R1 500 VAT is VAT output. 
  • This tax doesn’t belong to you — it belongs to SARS. 

In practical terms: VAT output = money collected from customers on behalf of SARS. 

 

What is VAT input? 

VAT Input is the VAT your business pays on purchases of goods and services from suppliers — provided those purchases are used in making taxable supplies. 

  • Example: You buy office equipment for R5 000 + 15% VAT → you pay R5 750. 
  • The R750 VAT is VAT input. 
  • You can usually claim this back from SARS if the purchase is for business use. 

Simply put: VAT input = tax you can recover on your business expenses. 

 

How it works in practice 

Each VAT reporting period (usually every 2 months), your business must complete a VAT201 return. Here’s how VAT input and output interact: 

  • Total up VAT output (VAT you charged customers). 
  • Total up VAT input (VAT you paid on business purchases). 
  • Subtract VAT input from VAT output: 
  • If VAT output > VAT input → You pay the difference to SARS. 

Example: Output R20 000 – Input R12 000 = R8 000 payable 

  • If VAT input > VAT output → SARS owes you a refund or credit. 

Example: Input R15 000 – Output R10 000 = R5 000 credit/refund 

 

Important South African rules 

Here are a few SA-specific points worth noting: 

  • Only claim VAT input on business-related, tax-invoice purchases — SARS requires valid tax invoices for input claims. 
  • You cannot claim input VAT on exempt or non-taxable supplies (e.g., financial services, certain residential rentals). 
  • The standard VAT rate in South Africa is currently 15%. 

 

Why this matters 

Understanding the difference between VAT input and VAT output helps your business: 

  • Manage cash flow (know when payments are due) 
  • Stay compliant with SARS 
  • Maximise legitimate VAT refunds 

 

If you’d like help preparing your VAT returns, reviewing your tax invoices, or checking which costs qualify for VAT input credits, we’re here to help! 

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