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 service or product 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 to vat or value added tax as a system of taxing products and services in a bid to prevent multiple taxation on goods and services. Vat also prevents tax evasion to a great extent as compared to earlier https://vatcontrol.com/vat systems. However, if you’re a trader or manufacturer that buys and sells goods under the vat system then you should 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 products or services 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, if your organization is situated in the United Kingdom then you could 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 goods and 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 will ultimately decide on the actual vat amount on each product or service.
In case you have sold an item for ?100 excluding vat then you will need to add 17.5% vat provided the product attracts the regular 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 by 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 need to be shown on each vat document. You can 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 actual amount of vat paid on imported services or goods should they have already been paid in the nation of origin. You should utilize the assistance of a qualified vat, customs and excise duties agent or consultant who has complete knowledge of uk vat and eu vat rules, particularly when you import products or 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 products or services.
It is crucial to understand each component that contributes towards price of your product or service. This may enable you to generate the maximum level of profits as well as keep a strict eye on indirect and direct expenses affecting your enterprise. Calculating net vat is indeed very important to know your actual costs to be able to sell your product or service and services at optimum prices.