Let’s say you sell goods or services in the United Kingdom 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 actual vat paid or collected over the actual product or service and will have 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 to vat or vat as a system of taxing services and products in a bid vatcheck to avoid multiple taxation on goods and services. Vat also prevents tax evasion to a degree as compared to earlier systems. However, if you’re 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 products or services.
It is thus imperative that you 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 situated in the UK then you might be subject to a standard 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 products or services while many goods or services 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 could ultimately determine the actual vat amount on each product or service.
In case you have sold a product 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 be ?17.50 while your gross amount including vat will likely be ?117.50. The net rate of vat will need to be specified in your vat invoice as well as your vat returns too. However, to be able to charge and collect vat you will have to get your own unique vat number that will have to be shown on each vat document. It is possible to 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 should they have been recently paid in the nation of origin. You should use the assistance of a qualified vat, customs and excise duties agent or consultant who has complete knowledge of uk vat and eu vat rules, particularly when you import products or 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 a product or service.
It is crucial to know about each factor 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 direct and indirect expenses that affect your enterprise. Calculating net vat is definitely very important to know your actual costs to be able to sell your products and services at optimum prices.