Understanding Input vs Output VAT (With Examples)

Value Added Tax (VAT) is a consumption tax charged at every stage of the supply chain. To manage VAT effectively, businesses must understand the difference between Input VAT and Output VAT—two crucial concepts in VAT compliance.

What is Output VAT?

Output VAT is the VAT you charge your customers when you sell goods or services. It’s collected on behalf of the government and must be remitted to the Kenya Revenue Authority (KRA).

Example:
If a customer pays for a product at KES 11,600 the vat at the rate of 16% is KES 1,600 ( Computation 16/116X 11600)

What is Input VAT?

Input VAT is the VAT you pay on goods and services you buy for your business. You can claim this back or offset it against your output VAT when filing your returns.

Example:
If you purchase raw materials at a cost of KES 5800(VAT inclusive) the VAT input is KES 800 ( computation 16/116X 5800=800).

How Does Input VAT vs Output VAT Work Together?

When you file your VAT returns, you calculate the difference between output VAT and input VAT.

If your output VAT is higher than input VAT, you pay the difference to KRA.
If your input VAT is higher, you may claim a refund or carry forward the excess.

Example:

Output VAT: KES 1,600
Input VAT: KES 800
VAT payable to KRA: KES 800

Why Is This Important?

Properly managing input and output VAT helps your business:

Avoid overpaying VAT
Maintain accurate records
Stay compliant with tax laws
Improve cash flow management

Need Help Managing VAT?

We specialise in tax consulting and VAT compliance to help your business maximize benefits and avoid penalties.

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📧 info@blueoceanoutsource.co.ke
📞 +254 729 842 847

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