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 know 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 in 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 prevent multiple taxation on products or services. Vat also prevents tax evasion to a great extent compared to earlier http://vatcontrol.com/vat systems. However, if you’re a trader or manufacturer that buys and sells goods within the vat system you then should 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 will 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, in case your organization is situated in the UK then you could be subject to a standard 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 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 determine the actual vat amount on each service or product.
If you have sold an item 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 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 will have to get your own unique vat number that will have to be shown on each vat document. It is possible to 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 Twelve months.
You may also claim the actual amount of vat paid on imported goods or services should they have been recently paid in the nation of origin. You should use the services of a competent vat, customs and excise duties agent or consultant who 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 be in accordance with the actual percentage of vat on the products or services.
It is crucial to understand each component that contributes towards price of your products or services. This will enable you to generate the maximum level of profits as well as keep a strict eye on indirect and direct expenses that affect your business. Calculating net vat is definitely very important to understand your actual costs to be able to sell your products and services at optimum prices.