If you sell goods or services in the United Kingdom or import them from other countries before selling them then calculating net VAT is very important to know your actual costs. This vat amount represents the actual vat paid or collected on the actual service or product and will need 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 over to vat or value added tax as a system of taxing services and products in a bid checkvatnumber to prevent multiple taxation on goods and services. Vat also prevents tax evasion to a degree as compared to earlier systems. However, if you’re 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 products or services.
It is 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, if your business is situated in the UK then you might be subject to a regular 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 goods and services while some 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 service or product.
If you have sold an item 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 now be ?17.50 while your gross amount including vat will likely 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, 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. You can turn into a vat registered trader by filling out the proper application vat form after your taxable sales have touched ?70,000 in the past 12 months.
You can also claim the exact amount of vat paid on imported goods or services should they have been recently paid in the country of origin. You should use the assistance of a competent vat, customs and excise duties agent or consultant who 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 always be in accordance with the actual percentage of vat on the products or services.
It is crucial to understand each component that contributes towards 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 understand your actual costs so that you can sell your product or service and services at optimum prices.