Let’s say you sell services or goods 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 actual vat paid or collected on the actual product or service and definately will need to be shown separately with your vat invoice together with your vat returns.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted over to vat or vat as being a system of taxing products and services in a bid to prevent multiple taxation on products or services. Vat also https://vatcontrol.com/vat prevents tax evasion to a great extent 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 your products or services.
It’s thus important to calculate the net vat on each product or service so that you will arrive at 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, if your organization is situated in the UK then you might be subject to a regular vat rate of 17.5% that may change to 20% after January 4, 2011. There’s also a reduced vat rate of 5% on certain goods and 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 product or service.
If you have sold a product 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 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 by your vat invoice along with your vat returns too. However, to be able to charge and collect vat you will have to get a own unique vat number that will have 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 in the past Twelve months.
You can 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 use the services of a qualified vat, customs and excise duties agent or consultant that has complete understanding 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 be in accordance with the actual percentage of vat on the product or service.
It is very important to know about each component that contributes towards the 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 indirect and direct expenses affecting your business. Calculating net vat is definitely essential to understand your actual costs to be able to sell your product or service and services at optimum prices.