Let’s say 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 on the actual service or product and definately will need to be shown separately with your vat invoice together with your vat returns search vat number.
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 prevent multiple taxation on goods and services. Vat also prevents tax evasion to a degree as compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods under the vat system then you should know about the tax component within 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 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 located in the UK then you might 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 goods and services while many 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 decide on the exact vat amount on each service or product.
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 be ?117.50. The net rate of vat will have to be specified by your vat invoice as well as your vat returns too. However, in order to charge and collect vat you’ll have to get a own unique vat number which will need to be displayed 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 nation of origin. You should utilize the services of a competent vat, customs and excise duties agent or consultant who 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 be in accordance with the actual percentage of vat on a product or service vies.
It is crucial to understand each factor that contributes towards price of your products or services. This will allow you to generate the maximum level of profits and also keep a strict eye on direct and indirect expenses affecting your enterprise. Calculating net vat is definitely very important to know your actual costs to be able to sell your products and services at optimum prices.