VAT and records
Output VAT and input VAT
Output VAT and input VAT are the two sides of VAT. Output VAT is what you charge customers on your sales; input VAT is what you pay suppliers on your purchases. The VAT return sets one against the other to give the net amount for the tax period.
What it means
Every VAT-registered business sits in the middle of a chain. When you sell something at the standard rate you add 15% to the price: that is output VAT. When you buy stock, packaging or services from a VAT-registered supplier, their invoice includes VAT too: that is your input VAT. So you collect VAT on one side and pay VAT on the other.
The practical point is that output VAT is not your income: not all the money that passes through the till is yours. It is tax collected on behalf of the Authority, and what you owe at the end of the period is the output VAT less the input VAT. Treating the till total as revenue and spending it is a quick route to a cash shortage when the return falls due.
A cafe sells coffee for SAR 100 plus SAR 15 VAT, so SAR 15 is output VAT. The same week it buys beans for SAR 40 plus SAR 6 VAT, so SAR 6 is input VAT. On those two transactions alone the net VAT for the period is SAR 9. Real periods hold many more lines, so the system totals them for you.
In practice
- Keep VAT as its own line on every sales and purchase record.
- Set output VAT aside separately instead of spending the whole till total.
- Keep each supplier's tax invoice so input VAT can be traced later.
- Compare the VAT report totals with your records before you file.
Questions about Output VAT and input VAT
Is the output VAT I collect part of my income?
No. Output VAT is collected from customers for the Authority, so it passes through your business and is settled when you file the VAT return, after input VAT is taken into account. Count only the price excluding VAT as your sales, and keep the VAT portion aside so the payment does not catch you short.
How do I find the VAT I owe for a period?
Add up the VAT on all your sales for the tax period, add up the VAT on your purchases for the same period, then subtract the second from the first. Fatooraz VAT reports show these totals, but you file the return yourself on ZATCA's portal. Check the figures against your records before relying on them.
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