For a registered trader, VAT payable is calculated as what?

For a registered trader, VAT payable is calculated as what?

• A. Input tax minus output tax
• B. Tax on profits
• C. Output tax minus input tax
• D. Output tax plus input tax

Answer: (C)

VAT payable is the difference between what you charge customers (output tax) and what you pay on purchases (input tax). In other words, you collect VAT on sales, reclaim VAT on purchases, and the net amount you owe to the tax authority is output tax minus input tax. If input tax is higher, you may get a refund or carry the credit forward. The idea of input tax minus output tax would flip the sign, which isn’t how payable is computed, and adding the two taxes or taxing profits aren’t relevant to calculating VAT payable.

VAT payable is the difference between what you charge customers (output tax) and what you pay on purchases (input tax). In other words, you collect VAT on sales, reclaim VAT on purchases, and the net amount you owe to the tax authority is output tax minus input tax. If input tax is higher, you may get a refund or carry the credit forward. The idea of input tax minus output tax would flip the sign, which isn’t how payable is computed, and adding the two taxes or taxing profits aren’t relevant to calculating VAT payable.