What is input tax (meaning)
Input tax is the VAT on business purchases, such as equipment, software and advice. You process the deductible part in your VAT return. The purchase, the use for taxed turnover and the invoice must meet the conditions. It is not automatically all the VAT that you pay.
Input VAT example
You can deduct the VAT you pay on business purchases from the VAT you charge your customers. Ultimately, you only pay VAT on what you sell, not on your expenses. An example involving a correct invoice and full use for VAT-taxable activities:
- You buy a laptop for 1,210 euros (including VAT)
- This includes 210 euros of VAT
- You can deduct that 210 euros as input tax in your tax return
- You owe 800 euros in VAT on turnover
- So you pay 800 - 210 = 590 euros to the Tax Office
Calculate and reclaim input tax
Add up the deductible VAT for each tax return period. For an amount including 21% VAT, the VAT portion is the amount × 21/121; for 9%, it is × 9/109. Example: €1,210 × 21/121 = €210. Where mixed rates apply, use the invoice breakdown and then assess the deduction.
The total deductible amount goes in section 5b. If, in a simple example, €100 VAT is due and €210 is deductible, a refund of €110 follows. This is not called negative input tax. Read more about VAT declaration.
The received invoice is decisive for the purchase VAT, subject to the usual conditions. Do not wait solely for payment. Output VAT under the invoice accounting method in principle follows the invoice date; exceptions and the cash accounting scheme have different rules.
Deduct input VAT
You cannot reclaim every VAT paid. The purchase must be business and used for taxed turnover. You can never deduct VAT on private expenses. If you work partly VAT-exempt, you may only deduct part of the VAT. Only expenses that you use for activities on which you charge VAT count in full. This is how you keep your records clean and avoid errors when audited.
Correct invoice (or receipt)
A normal invoice contains, among other things, the supplier, customer, date, invoice number, service provided and VAT breakdown. For a maximum of €100 including VAT, a simplified invoice may suffice, provided the required information is on it. An arbitrary receipt is not automatically sufficient. Special rules apply to public transport, among other things. Check the official invoice requirements.
When to do it and when not to do it?
You can deduct VAT on business purchases such as software or tools, but not on private expenses. A deduction restriction applies to food and drink consumed on the premises of a hospitality business. If some of your activities are VAT-exempt, you only deduct the VAT attributable to your taxable turnover.
| Situation | VAT deductible | Notes |
|---|---|---|
| Purchase for taxed sales | Yes | For your business, use what you charge VAT on |
| Purchase for exempt sales | No | No right to deduction in case of exemption |
| Shared use business and private | Partially | Only the business part deductible |
| Eating and drinking on the premises in the hospitality sector | Generally not | Restriction of deduction for the end user |
| Business hotel stay | According to terms and conditions | Assess separately when used for taxed turnover |
| Business gifts | Depending on circumstances | Specific deduction restriction tests; not automatically excluded |
Input tax on foreign VAT
Do not include foreign VAT as Dutch input VAT. Use the relevant refund procedure if you meet the conditions. If you must declare Dutch VAT under the reverse-charge mechanism, deduct it only to the extent that you have deduction rights. Under the KOR or for exempt activities, VAT may therefore be payable without a corresponding deduction.
Input tax on VAT reverse charge
If an invoice says “reverse charge VAT”, the supplier does not charge VAT. You have to declare that VAT yourself in your VAT return. You calculate the amount and immediately deduct it as input VAT. This way, you do not have to pay anything extra as long as it concerns taxed turnover. If you use the purchase for exempt activities, you may not deduct the VAT and must pay it yourself.
Read more about reverse-charge VAT.
Input tax under VAT exemption
Assess the specific performance: a sector such as healthcare or education does not automatically exempt all your activities. First, allocate costs exclusively to taxed or exclusively exempt activities. Only in the case of mixed costs do you determine a deductible portion according to the applicable method. Do not use the same turnover percentage for all purchases. Read more about VAT exemption.
Input VAT during the start-up phase
Even without turnover, you can reclaim VAT on your start-up costs. Think of equipment, marketing or advice. You must be able to demonstrate that you intend to start VAT-taxable activities. For example, keep quotes, invoices and, if applicable, an hours log as proof of your preparations. Did you already incur costs before your registration with the Chamber of Commerce? Then check the correct period and the deduction conditions; registration alone does not grant the right to deduction. Read more about start-up costs.
