Let’s say you sell goods or services in the United Kingdom or import them from other countries before selling them then calculating net VAT is essential to understand your actual costs. This vat amount represents the actual vat paid or collected on the actual product or service and will have to be shown separately in your vat invoice as well as your vat returns.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted to vat or vat as a system of taxing services and products in a bid to avoid multiple taxation on goods and services. Vat also vatvalidation prevents tax evasion to a great extent compared to earlier systems. However, if you’re a trader or manufacturer that buys and sells goods within the vat system then you should know about the tax component within your final costing of the products or services.
It is thus imperative that you calculate the net vat on each products or services so that you will come to accurate costs and also calculate your profits correctly. Each eu state or country has different vat rate slabs that attract different percentages of vat. For instance, if your business is situated in the UK then you could be governed by a regular vat rate of 17.5% that will switch to 20% after January 4, 2011. There’s also a reduced vat rate of 5% on certain products or services while some services or goods are generally vat exempt or attract zero vat. The hmrc vat department or hm revenue and customs department has provided for 14,000 classifications that will ultimately determine the exact vat amount on each product or service.
In case you have sold an item for ?100 excluding vat then you will have to add 17.5% vat provided the product attracts the regular vat rate. Your net vat rate will now be ?17.50 while your gross amount including vat will likely be ?117.50. The net rate of vat will need to be specified in your vat invoice as well as your vat returns too. However, to be able to charge and collect vat you’ll have to get a own unique vat number that will need to be shown on each vat document. It is possible to turn into a vat registered trader by filling in an appropriate application vat form after your taxable sales have touched ?70,000 during the past Twelve months.
You may also claim the exact amount of vat paid on imported services or goods should they have been recently paid in the nation of origin. You should utilize the services of a competent vat, customs and excise duties agent or consultant that has complete knowledge of uk vat and eu vat rules, particularly when you import goods and services from member eu countries that follow the system of vat. Although vat rates might differ in each country, the net vat rate will always be based on the actual percentage of vat on a product or service.
It is very important to know about each component that contributes towards the price of your products or services. This will allow you to earn the maximum level of profits and also keep a strict eye on indirect and direct expenses that affect your enterprise. Calculating net vat is indeed essential to know your actual costs so that you can sell your product or service and services at optimum prices.