If you sell services or goods in the United Kingdom 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 definately will have to be shown separately with your vat invoice together with your vat returns vat registration.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted over to vat or vat as being a system of taxing products and services in a bid to avoid multiple taxation on products or services. Vat also prevents tax evasion to a great extent as compared to earlier systems. However, if you’re a trader or manufacturer that buys and sells goods under the vat system then you should know of the tax component in your final costing of your goods and services.
It is thus imperative that you calculate the net vat on each product or service so that you 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 instance, in case your business is situated in the United Kingdom then you could be governed by a regular vat rate of 17.5% that will change to 20% after January 4, 2011. There is also a reduced vat rate of 5% on certain products or services while many 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 will ultimately decide on the exact vat amount on each service or product.
In case you have sold a product for ?100 excluding vat then you will have to add 17.5% vat provided the product 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 along with 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 need to be shown on each vat document. It is possible to 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 Twelve months.
You may also claim the exact amount of vat paid on imported services or goods should they have already been paid in the country of origin. You should utilize the services of a qualified vat, customs and excise duties agent or consultant that has complete knowledge 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 always be in accordance with the actual percentage of vat on a product or service vies.
It is crucial to understand each component that contributes towards the price of your products or services. This may allow you to generate the maximum level of profits as well as keep a strict eye on indirect and direct expenses affecting your business. Calculating net vat is definitely essential to understand your actual costs so that you can sell your products and services at optimum prices.