If you sell services or goods 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 exact vat paid or collected on the actual service or product and definately will have to be shown separately in your vat invoice as well as your vat returns vat registration.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted over to vat or vat as a system of taxing services and products in a bid to prevent multiple taxation on products or 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 you then should 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 could be subject to a standard 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 goods and services while some 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 could ultimately determine the actual vat amount on each product or service.
In case you have sold an item for ?100 excluding vat then you’ll have to add 17.5% vat provided the product attracts the standard 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 in your vat invoice as well as your vat returns too. However, to be able to charge and collect vat you will have to get your own unique vat number that will have to be displayed on each vat document. You can 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 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 country of origin. You should use the services of a qualified vat, customs and excise duties agent or consultant who 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 based on the actual percentage of vat on a products or services search vat number.
It is crucial to understand each factor that contributes towards cost of your products or services. This will enable you to generate the maximum level of profits as well as keep a strict eye on direct and indirect expenses that affect your enterprise. Calculating net vat is definitely essential to understand your actual costs so that you can sell your products and services at optimum prices.