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 know your actual costs. This vat amount represents the exact vat paid or collected on the actual product or service and definately will have to be shown separately with your vat invoice together with your vat returns.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted to vat or value added tax as a system of taxing services and products in a bid to prevent multiple taxation on goods and services. Vat also https://vatcontrol.com/vat prevents tax evasion to a degree compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods within the vat system then you should certainly know about the tax component within your final costing of your goods and services.
It is thus important to calculate the net vat on each product or service so that you arrive at 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 organization is situated in the United Kingdom then you might be subject to a regular vat rate of 17.5% that may switch to 20% after January 4, 2011. There is also a reduced vat rate of 5% on certain products or services while some goods or services 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 could ultimately decide on the actual vat amount on each product or service.
In case you have sold a product for ?100 excluding vat then you’ll need 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 have to be specified in your vat invoice as well as your vat returns too. However, in order to charge and collect vat you’ll have to get a own unique vat number that will have to be displayed on each vat document. You can turn into a vat registered trader by filling out the proper application vat form after your taxable sales have touched ?70,000 during the past 12 months.
You can also claim the exact amount of vat paid on imported goods or services should they have already been paid in the nation 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, especially when you import products or 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 very important to understand each component that contributes towards cost of your products or services. This may allow you to generate the maximum amount of profits as well as keep a strict eye on direct and indirect expenses that affect your business. Calculating net vat is indeed essential to understand your actual costs to be able to sell your product or service and services at optimum prices.