Let’s say 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 actual vat paid or collected on the actual product or service 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 over to vat or value added tax as a system of taxing products and services in a bid to prevent multiple taxation on products or 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 then you should know about the tax component in your final costing of the products or services.
It’s thus important to 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 located in the United Kingdom then you might be subject to 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 a product for ?100 excluding vat then you’ll have to add 17.5% vat provided the product 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 need to be specified by your vat invoice as well as your vat returns too. However, in order to charge and collect vat you’ll have to get your own unique vat number which 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 services or goods if they have been recently paid in the country of origin. You should use the services of a competent vat, customs and excise duties agent or consultant that 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 be based on the actual percentage of vat on a product or service.
It is very important to know about each factor that contributes towards the cost 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 that affect your enterprise. Calculating net vat is indeed very important to understand your actual costs so that you can sell your products and services at optimum prices.