VAT paid to suppliers on purchases of goods or services. Can be credited against output VAT to determine net VAT payable.
Input VAT is the 12% VAT you pay to your suppliers when you purchase goods or services for your business. As a VAT-registered business, you can use this input VAT as a credit against your output VAT — only the net difference (output minus input) is paid to the BIR. This credit mechanism prevents VAT from cascading at every level of the supply chain.
To claim input VAT, you must hold a valid VAT Sales Invoice or Official Receipt from a VAT-registered supplier showing the VAT amount separately. Input VAT without a proper VAT invoice cannot be claimed and will be disallowed during a BIR audit.
In practice: Isabela Canteen buys ₱150,000 in food supplies monthly from VAT-registered suppliers, paying ₱18,000 in input VAT. The canteen earns ₱400,000 in sales and collects ₱48,000 in output VAT. Net VAT due = ₱48,000 − ₱18,000 = ₱30,000. The canteen reports this monthly in BIR Form 2550M.
Why it matters: Meticulous collection of supplier VAT invoices directly reduces your VAT payments. A ₱1,000 input VAT credit saves ₱1,000 in cash — not just a deduction, but a peso-for-peso reduction in tax due. Businesses that fail to collect VAT receipts from suppliers are literally leaving money on the table and overpaying the BIR.
If your input VAT exceeds your output VAT in a given period (common for exporters or businesses with large capital expenditures), the excess becomes a carry-over credit or can be claimed as a refund or tax credit certificate (TCC) — though the refund process can take years.