If you sell services or goods in the United Kingdom or import them from other countries before selling them then calculating net VAT is essential to know your actual costs. This vat amount represents the exact 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 to vat or value added tax as being a system of taxing products and services in a bid to prevent multiple taxation on products or services. Vat also checkvatnumber prevents tax evasion to a great extent 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 about the tax component in your final costing of the products or services.
It is thus important to calculate the net vat on each product or service 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 instance, if your organization is situated in the United Kingdom then you could be subject to a standard 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 goods and 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 could ultimately decide on the actual vat amount on each product or service.
If you have sold a product for ?100 excluding vat then you’ll 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 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 shown on each vat document. You can turn into a vat registered trader by filling in the proper application vat form after your taxable sales have touched ?70,000 in the past Twelve months.
You can also claim the actual amount of vat paid on imported goods or services should they have already been 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 understanding of uk vat and eu vat rules, particularly 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 products or services.
It is very important to know about each factor that contributes towards the price of your products or services. This may enable you to generate the maximum level of profits as well as keep a strict eye on indirect and direct expenses affecting your enterprise. Calculating net vat is definitely very important to know your actual costs so that you can sell your products and services at optimum prices.