GlossaryEN1 min readUpdated: Jun 26, 2026

input VAT deduction procedure

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Last updated: 26 June 2026Published: 27 January 2026

Source: https://ec.europa.eu/taxation_customs/business/vat_en

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Incoterms 2020 Simulator: Who bears costs & risk?

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Definition & Explanation

A freight forwarder pays VAT on purchased cargo capacity, warehouse space, and vehicles—the input VAT deduction procedure allows that cost to be offset against the output VAT charged to customers, leaving the business tax-neutral on its purchases. Input VAT is the VAT a registered company has paid on goods and services it has acquired. The procedure nets input against output: if input VAT exceeds output VAT for a period, the business is entitled to a refund from the tax authority. This mechanism gives practical effect to the core principle of VAT, ensuring the tax burden rests only on value genuinely added at each stage rather than accumulating across the supply chain. In freight forwarding, where purchased freight capacity and logistics costs generate substantial input VAT, managing this procedure efficiently has a direct impact on cash flow.

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