If you sell goods or services in the UK 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 exact vat paid or collected on the actual service or product and 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 value added tax as a system of taxing products and services in a bid to prevent 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 about the tax component in your final costing of your goods and services.
It is thus important to calculate the net vat on each product or service so that you will 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 instance, if your business is located in the United Kingdom then you might be www.vatvalidation.com/vat subject to a regular vat rate of 17.5% that may switch to 20% after January 4, 2011. There is also a reduced vat rate of 5% on certain goods and services while some 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 decide on the actual vat amount on each service or product.
If you have sold an item 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 be ?117.50. The net rate of vat will have to be specified by your vat invoice as well as your vat returns too. However, in order to charge and collect vat you will have to get your own unique vat number which will have to be displayed on each vat document. It is possible to turn into a vat registered trader by filling in the proper application vat form after your taxable sales have touched ?70,000 in the past Twelve months.
You can also claim the exact amount of vat paid on imported services or goods if they have been recently paid in the nation of origin. You should utilize the services 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 products or services.
It is very important to know about each component that contributes towards the cost of your products or services. This will enable you to generate the maximum level of profits as well as keep a strict eye on direct and indirect expenses that affect 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.