Let’s say you sell services or goods 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 being a system of taxing services and products in a bid to avoid multiple taxation on goods and services. Vat also check vat number prevents tax evasion to a great extent as compared to earlier systems. However, if you’re a trader or manufacturer that buys and sells goods under the vat system then you should know of the tax component in your final costing of your products or services.
It is thus imperative that you 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 organization is situated in the United Kingdom then you could be governed by a regular vat rate of 17.5% that may switch 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 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 product or service.
In case you have sold a product for ?100 excluding vat then you will need to add 17.5% vat provided the product attracts the standard 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’ll have to get a own unique vat number that will have to be displayed 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 Twelve months.
You can also claim the exact amount of vat paid on imported goods or services should they have been recently paid in the country of origin. You should use the assistance of a competent 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 in accordance with the actual percentage of vat on a products or services.
It is crucial to know about each factor that contributes towards the cost of your product or service. This may enable you to earn the maximum level of profits and also keep a strict eye on direct and indirect expenses that affect your business. Calculating net vat is indeed essential to know your actual costs so that you can sell your product or service and services at optimum prices.