Let’s say you sell goods or services in the UK 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 over the actual product or service and will need to be shown separately with your vat invoice as well as 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 services and products 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’re a trader or manufacturer that buys and sells goods within the vat system you then should know of the tax component in your final costing of your products or services.
It’s thus important to 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, in case your organization is situated in the United Kingdom then you could be subject to 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 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 determine the actual vat amount on each service or product.
In case you have sold a product for ?100 excluding vat then you’ll have to add 17.5% vat provided the item attracts the regular vat rate. Your net vat rate will now 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 along with your vat returns too. However, in order to charge and collect vat you’ll have to get your 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 the proper application vat form after your taxable sales have touched ?70,000 in the past 12 months.
You can also claim the actual amount of vat paid on imported goods or services if they have been recently paid in the country of origin. You should use the assistance of a qualified 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 be based on the actual percentage of vat on the product or service vies.
It is crucial to know about each factor that contributes towards cost of your products or services. This will allow you to earn the maximum level of profits as well as keep a strict eye on direct and indirect expenses affecting your business. Calculating net vat is definitely very important to understand your actual costs so that you can sell your product or service and services at optimum prices.