Let’s say you sell goods or services in the UK or import them from other countries before selling them then calculating net VAT is essential to know your actual costs. This vat amount represents the actual vat paid or collected over the actual product or service and will have to be shown separately in your vat invoice together with your vat vatcheck.com/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 products or services. Vat also prevents tax evasion to a great extent as compared to earlier systems. However, if you’re a trader or manufacturer that buys and sells goods under the vat system you then should certainly know about the tax component in your final costing of the products or services.
It’s thus important to calculate the net vat on each product or service so that you come to accurate costs as well as calculate your profits correctly. Each eu state or country has different vat rate slabs that attract different percentages of vat. For example, in case your business is situated in the UK then you might be governed by a standard vat rate of 17.5% that will change to 20% after January 4, 2011. There’s also a reduced vat rate of 5% on certain goods and services while many goods or services are either vat exempt or attract zero vat. The hmrc vat department or hm revenue and customs department has provided for 14,000 classifications that could ultimately decide on the actual vat amount on each service or product.
If you have sold a product for ?100 excluding vat then you’ll need to add 17.5% vat provided the product attracts the standard vat rate. Your net vat rate will now be ?17.50 while your gross amount including vat will be ?117.50. The net rate of vat will have to be specified in your vat invoice along with your vat returns too. However, to be able to charge and collect vat you’ll have to get a own unique vat number which will need to be shown on each vat document. You can turn into a vat registered trader by filling out an appropriate application vat form after your taxable sales have touched ?70,000 during the past 12 months.
You can also claim the actual amount of vat paid on imported goods or services should they have already been paid in the country of origin. You should utilize the assistance of a competent vat, customs and excise duties agent or consultant that has complete understanding 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 be in accordance with the actual percentage of vat on the product or service.
It is crucial to understand each factor that contributes towards cost of your products or services. This may enable you to generate the maximum amount of profits and also keep a strict eye on direct and indirect expenses that affect your business. Calculating net vat is indeed essential to know your actual costs to be able to sell your product or service and services at optimum prices.