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 very important to understand your actual costs. This vat amount represents the exact vat paid or collected over the actual service or product 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 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 great extent compared to earlier https://vatcontrol.com/vat systems. However, if you are a trader or manufacturer that buys and sells goods under the vat system you then should know about the tax component within your final costing of your goods and services.
It’s thus imperative that you calculate the net vat on each products or services so that you will 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 example, if your organization is situated in the United Kingdom then you could 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 some 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 will ultimately determine the exact vat amount on each service or product.
If you have sold an item for ?100 excluding vat then you’ll need to add 17.5% vat provided the item 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 need to be specified in your vat invoice along with your vat returns too. However, to be able to charge and collect vat you’ll have to get your own unique vat number which 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 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 use 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 always be based on the actual percentage of vat on a products or services.
It is crucial to know about each factor that contributes towards the price of your product or service. This will enable you to earn the maximum amount of profits as well as keep a strict eye on indirect and direct expenses affecting your enterprise. Calculating net vat is indeed very important to know your actual costs so that you can sell your product or service and services at optimum prices.