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 understand your actual costs. This vat amount represents the actual vat paid or collected over the actual product or service and definately will need to be shown separately with 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 avoid multiple taxation on products or services. Vat also prevents tax evasion to a degree as compared to earlier vatcontrol.com/vat systems. However, if you are a trader or manufacturer that buys and sells goods under the vat system you then should certainly know about the tax component in your final costing of your products or services.
It is thus imperative that you calculate the net vat on each product or service so that you come to 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 could be governed by a regular vat rate of 17.5% that will switch to 20% after January 4, 2011. There is also a reduced vat rate of 5% on certain products or 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 could ultimately decide on the actual vat amount on each service or product.
If you have sold a product for ?100 excluding vat then you will need to add 17.5% vat provided the product attracts the regular 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 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 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 Twelve months.
You can 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 utilize the assistance 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 be based on the actual percentage of vat on a product or service.
It is crucial to know about each factor that contributes towards cost of your product or service. This may enable you to earn the maximum amount of profits and also keep a strict eye on indirect and direct expenses affecting your business. Calculating net vat is definitely very important to know your actual costs so that you can sell your product or service and services at optimum prices.