If you sell goods or services in the UK 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 over the actual product or service and will need 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 over to vat or value added tax as being a system of taxing products and services in a bid to avoid multiple taxation on products or services. Vat also prevents tax evasion to a degree compared to earlier systems. However, if you’re a trader or manufacturer that buys and sells goods under the vat system then you should know about the tax component within your final costing of the goods and services.
It is thus important to calculate the net vat on each products or services 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, if your business is situated in the United Kingdom then you might be vatvalidation.com/vat subject to a regular vat rate of 17.5% that may change to 20% after January 4, 2011. There is also a reduced vat rate of 5% on certain products or services while many 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 could ultimately determine the exact vat amount on each product or service.
If you have sold a product for ?100 excluding vat then you’ll need to add 17.5% vat provided the item attracts the regular 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 as well as your vat returns too. However, to be able to charge and collect vat you’ll have to get your own unique vat number which will have to be displayed on each vat document. It is possible to turn into a vat registered trader by filling in the proper application vat form after your taxable sales have touched ?70,000 during the past Twelve months.
You can also claim the exact amount of vat paid on imported services or goods if they have already been paid in the nation of origin. You should use the assistance of a competent vat, customs and excise duties agent or consultant that has complete knowledge of uk vat and eu vat rules, especially 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 cost of your product or service. This may enable you to earn the maximum amount of profits as well as keep a strict eye on direct and indirect expenses affecting your enterprise. Calculating net vat is definitely very important to understand your actual costs so that you can sell your product or service and services at optimum prices.