If you sell goods or services 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 actual vat paid or collected on the actual product or service and definately will need to be shown separately with your vat invoice as well as your vat returns.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted over 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 check vat number 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 the goods and services.
It’s thus important to 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, in case your business is located in the UK then you could be governed by a regular vat rate of 17.5% that will switch to 20% after January 4, 2011. There’s also a reduced vat rate of 5% on certain products or services while some 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 determine the actual vat amount on each service or product.
In case you have sold a product for ?100 excluding vat then you’ll have to add 17.5% vat provided the item attracts the standard 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 have to be specified in 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 shown on each vat document. It is possible to 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 12 months.
You may also claim the actual amount of vat paid on imported goods or services if they have already been paid in the country of origin. You should utilize the services of a competent vat, customs and excise duties agent or consultant that has complete understanding 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 the products or services.
It is very important to know about each factor that contributes towards the price 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 affecting your business. Calculating net vat is definitely very important to know your actual costs to be able to sell your product or service and services at optimum prices.