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 understand your actual costs. This vat amount represents the exact vat paid or collected over the actual service or product and definately will have 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 to vat or vat as a system of taxing products and services in a bid to prevent vat check multiple taxation on goods and services. Vat also prevents tax evasion to a degree as 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 of the tax component within your final costing of your products or services.
It’s thus important to calculate the net vat on each product or service so that you will 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 instance, in case your organization is located 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 products or services while many 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.
If you have sold a product for ?100 excluding vat then you will have to add 17.5% vat provided the item attracts the standard 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 by your vat invoice along with your vat returns too. However, to be able to charge and collect vat you will have to get your own unique vat number which 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 in the past 12 months.
You may also claim the actual amount of vat paid on imported goods or services if they have been recently paid in the nation of origin. You should use the services of a qualified vat, customs and excise duties agent or consultant that 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 based on the actual percentage of vat on a products or services.
It is very important to know about each factor that contributes towards the price of your products or services. This will allow you to earn the maximum amount of profits and also keep a strict eye on direct and indirect expenses affecting your business. Calculating net vat is definitely very important to understand your actual costs so that you can sell your products and services at optimum prices.