Input VAT recovery is what keeps VAT from stacking up at every stage of a supply chain. Get it wrong, and you either overpay or claim something you should not.
Every registered business that pays VAT on its own costs needs to understand this, not just large companies with dedicated finance teams.
What input VAT actually is
Input VAT is the VAT a business pays on its own costs; output VAT is what it charges its customers. VAT paid on goods, services and fixed assets used to make taxable supplies, and only the taxable share counts where a cost serves both taxable and non-taxable activity.
Recovering it means deducting it from the output VAT you owe, rather than treating it as a cost you simply absorb.
The deadline you cannot recover it after
Five years after the end of the tax period in which it was incurred. Once that window closes, a claim on that input VAT lapses, regardless of how well documented it is.
Reconciling your input and output VAT every month, rather than saving receipts for a rainy day, is the simplest way to stay inside that window. A monthly habit also makes each return faster to prepare.
Why exempt supplies do not qualify
Input VAT tied to the cost of making an exempt supply cannot be recovered at all. That is a real cost difference between an exempt supply and a zero-rated one, even though both charge the buyer nothing extra. Our exempt-versus-zero-rated comparison sets out the distinction in full.
A zero-rated supply, by contrast, is still a taxable supply, so the input VAT behind it stays recoverable.
Where a leftover credit goes
Where input VAT exceeds output VAT in a given month, the excess does not disappear. It carries forward as a credit against a future return, or the business can ask for it back directly. Our guide to VAT refunds walks through what a refund request itself involves.
A simple example
Here is a made-up example. A business charges ₦300,000 in output VAT for the month and has paid ₦180,000 in input VAT on stock and services bought in.
The net position is ₦120,000, and that is what the business remits. If the input VAT had instead been ₦350,000, the business would carry forward or claim back the ₦50,000 difference rather than pay anything that month.
Keeping the claim defensible
A claim is only as strong as the invoice behind it. Our piece on VAT invoices and records covers what to keep on file, since a missing invoice can undo a claim that was otherwise valid.
For the return this all feeds into, see the VAT monthly return guide, or browse more NRS and Rev360 articles.