Let’s say 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 on the actual product or service and will have to be shown separately in your vat invoice together with your vat vat check returns.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted to vat or value added tax as a system of taxing services and products in a bid to prevent multiple taxation on products or services. Vat also prevents tax evasion to a degree compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods within the vat system then you should know about the tax component within your final costing of the goods and services.
It is thus important to calculate the net vat on each products or services 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 example, in case your organization is located 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’s also a reduced vat rate of 5% on certain goods and services while some goods or services 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 determine the exact vat amount on each product or service.
If you have sold a product for ?100 excluding vat then you will need to add 17.5% vat provided the product attracts the standard 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 have to be specified in 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. You can turn into a vat registered trader by filling in an appropriate application vat form after your taxable sales have touched ?70,000 during the past 12 months.
You may also claim the actual amount of vat paid on imported services or goods should they have already been paid in the country of origin. You should use 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 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 based on the actual percentage of vat on the products or services.
It is crucial to understand each factor that contributes towards the price of your product or service. This may allow you to generate the maximum level of profits and also keep a strict eye on direct and indirect expenses that affect your business. Calculating net vat is definitely essential to understand your actual costs so that you can sell your product or service and services at optimum prices.