If you sell services or goods in the United Kingdom or import them from other countries before selling them then calculating net VAT is very important to know your actual costs. This vat amount represents the exact vat paid or collected over the actual product or service and definately will need 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 value added tax as being a system of taxing services and products in a bid to avoid multiple taxation on goods and services. Vat also check vat number prevents tax evasion to a great extent 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 your goods and 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, if your organization is situated in the United Kingdom then you could be governed by a standard vat rate of 17.5% that will switch to 20% after January 4, 2011. There is also a reduced vat rate of 5% on certain goods and services while some services or goods 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 will ultimately determine the actual vat amount on each service or product.
If you have sold a product for ?100 excluding vat then you’ll 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 along with your vat returns too. However, in order to charge and collect vat you will have to get your own unique vat number which will need 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 in the past 12 months.
You may also claim the exact amount of vat paid on imported goods or services 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 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 a products or services.
It is very important to understand each factor that contributes towards price of your product or service. This will enable you to earn 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 essential to know your actual costs so that you can sell your products and services at optimum prices.