How to Calculate VAT Payable

VAT payable is the total output VAT you charged customers during a filing period, minus the total input VAT you paid on deductible business purchases in that same period. If the result is positive, that's what you owe the tax authority. If it's negative, you've paid more VAT than you collected and you're due a refund or a credit against your next period. This is a period-level total across every sale and purchase, not the VAT on any one invoice.

The VAT Payable Formula

Add up the VAT you charged across every sale in the period. That's your output VAT. Add up the VAT you paid on every deductible business purchase in the same period. That's your input VAT. Subtract the second number from the first, and the result is what you owe (or are owed) for that period.

Output VAT vs Input VAT

Output VAT is the tax you added to your own invoices and collected from clients on their behalf, on the tax authority's behalf. Input VAT is the tax your suppliers charged you on business purchases, which you're allowed to claim back because you're not the end consumer of those goods or services. The gap between the two is what actually reaches the tax authority.

A Worked Example

Say you invoiced clients a total of 120,000 net across the period, charging 15% VAT, which comes to 18,000 in output VAT. In the same period, you spent 76,667 net on deductible business purchases, also at 15%, which comes to 11,500 in input VAT. Subtract input from output: 18,000 minus 11,500 leaves 6,500 payable to the tax authority for that period.

What a Negative Number Means

If input VAT is higher than output VAT for the period, the formula gives you a negative result. That happens when purchases outpace sales, common in a slow month or right after a big equipment buy. Rather than owing anything, you're due a refund or a credit carried forward against a future period, depending on how your local tax authority handles it.

Keeping the Numbers Ready for Filing

The calculation itself is simple. What actually takes time is pulling the output and input figures together from every invoice and receipt in the period. Using our free VAT calculator on each invoice as you issue it, rather than reconstructing the tax amount later from a gross total, means the output VAT side of your return is already broken out by the time filing rolls around.