Excess input VAT

What it means

Excess input VAT arises when deductible input tax for a period exceeds output tax. The state refunds the difference, normally after the deadline and some scrutiny.

It commonly appears on an investment, at the start of production, or where exports and EU supplies dominate: output tax is zero while inputs carry tax.

Excess input VAT is not automatically money in the bank. If the payer has arrears in another tax on the taxpayer’s tax account, the tax administrator first applies the refund against them and returns only the rest. It can likewise cover tax about to fall due, so the actual refund depends on the state of the whole account, not on a single return.

How it works in practice

Before filing it pays to review the documents behind the claim: formal correctness, whether the partner exists, and whether the control statement agrees. An extra hour here is the best-spent one.

The tax office often sends a request for explanation or opens an audit. The refund is delayed, so cash flow should not treat it as certain income in a given month.

For an investment that will produce a large refund we put the supporting file together before filing: contracts, delivery notes, acceptance records, photographs and the bank statements showing payment. When a request arrives we answer within the same week, so the refund is not delayed by the time it would otherwise take to hunt for documents.

What to watch out for

Part of the risk lies in who you trade with. If a supplier never paid the tax, the office asks whether the customer knew or could have known, and refuses the deduction citing joint liability.

Excess input VAT built on advance invoices does not hold up. An advance invoice is not a tax document, and the deduction is available only from the document the supplier issues for the payment received. An audit moves the deduction into the correct period, and interest or a penalty is charged on the difference between periods.