If you sell goods or services in the UK or import them from other countries before selling them then calculating net VAT is very important to understand your actual costs. This vat amount represents the actual vat paid or collected on the actual service or product and will have 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 products and services in a bid to avoid multiple taxation on products or services. Vat also vatcontrol.com/vat prevents tax evasion to a great extent as compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods within the vat system you then should certainly know of the tax component within your final costing of the goods and services.
It’s thus imperative that you 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 example, in case your business is located in the United Kingdom then you might be governed by a regular vat rate of 17.5% that will switch to 20% after January 4, 2011. There’s 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 could ultimately decide on the exact vat amount on each product or service.
In case you have sold a product for ?100 excluding vat then you’ll have 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 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, to be able to charge and collect vat you’ll 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 in an appropriate application vat form after your taxable sales have touched ?70,000 during the past 12 months.
You can also claim the actual amount of vat paid on imported goods or services if they have already been paid in the country of origin. You should utilize 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 in accordance with the actual percentage of vat on the products or services.
It is crucial to know about each factor that contributes towards the price of your product or service. This will enable you to generate the maximum amount of profits and also keep a strict eye on indirect and direct expenses that affect your business. Calculating net vat is definitely very important to know your actual costs to be able to sell your product or service and services at optimum prices.