Let’s say you sell services or goods in the United Kingdom 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 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 vat as being a system of taxing services and products in a bid checkvatnumber.com to avoid multiple taxation on products or services. Vat also prevents tax evasion to a great extent compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods under the vat system then you should certainly know about the tax component in your final costing of your goods and services.
It is thus imperative that you calculate the net vat on each products or services so that you will arrive at 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, in case your business is situated in the UK then you might be governed by a regular vat rate of 17.5% that may change to 20% after January 4, 2011. There is also a reduced vat rate of 5% on certain products or services while many services or goods 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 determine the exact vat amount on each product or service.
If you have sold a product 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 be ?117.50. The net rate of vat will have to be specified by your vat invoice as well as your vat returns too. However, to be able to charge and collect vat you will have to get a own unique vat number which will need to be displayed on each vat document. You can turn into a vat registered trader by filling in an appropriate 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 services or goods if they have already been paid in the nation of origin. You should utilize the services of a competent vat, customs and excise duties agent or consultant who 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 be based on the actual percentage of vat on a product or service.
It is very important to know about each component that contributes towards price of your products or services. This will allow you to generate the maximum amount of profits and also keep a strict eye on indirect and direct expenses that affect 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.