Calculating net vat is very important to know your actual

If 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 know your actual costs. This vat amount represents the exact vat paid or collected on the actual product or service and definately will need to be shown separately in your vat invoice together with your vat returns.

Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted to vat or vat as a system of taxing products and services in a bid to avoid vatcheck multiple taxation on products or 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 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 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, if your organization is situated in the United Kingdom then you might be governed by a standard vat rate of 17.5% that may change to 20% after January 4, 2011. There is also a reduced vat rate of 5% on certain products or 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 will ultimately determine the actual vat amount on each service or product.

If you have sold an item for ?100 excluding vat then you will have to add 17.5% vat provided the item attracts the standard 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 have to be specified in 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 which will have to be displayed on each vat document. You can turn into a vat registered trader by filling out an appropriate application vat form after your taxable sales have touched ?70,000 in the past Twelve months.

You may also claim the exact amount of vat paid on imported goods or services if 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 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 in accordance with the actual percentage of vat on the product or service.

It is crucial to know about each factor that contributes towards cost of your product or service. This will enable you to generate the maximum amount of profits as well as keep a strict eye on direct and indirect expenses affecting your enterprise. 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.