VAT or Value Added Tax

Definition:

A VAT business transaction is subject to 12% tax rate.

Output VAT vs Input VAT

Output VAT is the 12% tax from the VATable sales or gross receipts of the VAT Registered business owner.

Input VAT  is the 12% tax from the VATable purchases, disbursements or expenses made by the business owner.

The Input VAT is deducted from the Output VAT to get the net VAT payable.

Illustrative Formula:

Output VAT
Less: Input VAT
Equals Net VAT Payable