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 know 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 with 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 being a system of taxing products and services in a bid to avoid multiple taxation on goods and services. Vat also prevents tax evasion to a degree compared to earlier http://vatcontrol.com/vat systems. However, if you are a trader or manufacturer that buys and sells goods within the vat system you then should know about the tax component in your final costing of the goods and services.
It is 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 instance, if your organization is located in the UK then you could be governed by a standard vat rate of 17.5% that may switch 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 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 product or service.
In case you have sold a product for ?100 excluding vat then you will 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 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’ll have to get a own unique vat number that will have to be displayed 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 during the past Twelve months.
You can also claim the exact amount of vat paid on imported services or goods if they have been recently paid in the nation of origin. You should utilize the assistance of a qualified 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 product or service.
It is very important to know about each component that contributes towards the price of your product or service. This may allow you to generate the maximum amount of profits and also keep a strict eye on direct and indirect expenses affecting your business. 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.