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 actual vat paid or collected over the actual product or service and will need 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 vat as being a system of taxing services and products in a bid to avoid multiple taxation on products or services. Vat also vat validation prevents tax evasion to a great extent compared to earlier 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 your products or services.
It’s thus imperative that you 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 example, in case your organization is located in the United Kingdom then you could be governed by a regular vat rate of 17.5% that may change to 20% after January 4, 2011. There’s also a reduced vat rate of 5% on certain products or services while some services or goods 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 could 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 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 need 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 a own unique vat number that will have to be shown on each vat document. It is possible to turn into a vat registered trader by filling out the proper application vat form after your taxable sales have touched ?70,000 during the past Twelve months.
You may also claim the actual amount of vat paid on imported services or goods 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 that has complete knowledge of uk vat and eu vat rules, especially 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 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 amount 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.