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 very important to understand your actual costs. This vat amount represents the exact vat paid or collected on the actual product or service and will have 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 to vat or value added tax as a system of taxing services and products in a bid to prevent vatcheck multiple taxation on goods and services. Vat also prevents tax evasion to a great extent compared to earlier systems. However, if you’re a trader or manufacturer that buys and sells goods under the vat system you then should know of 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 instance, in case your organization is situated in the United Kingdom then you could be governed by a regular vat rate of 17.5% that will switch to 20% after January 4, 2011. There is also a reduced vat rate of 5% on certain goods and services while some 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 an item for ?100 excluding vat then you’ll 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 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 your own unique vat number that will need 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 12 months.
You can also claim the actual amount of vat paid on imported goods or services should they have been recently paid in the country of origin. You should utilize the services of a competent 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 always be based on the actual percentage of vat on a product or service.
It is crucial to know about each factor that contributes towards price of your products or services. This will enable you to generate the maximum level of profits and also keep a strict eye on direct and indirect expenses affecting your business. Calculating net vat is definitely essential to understand your actual costs to be able to sell your products and services at optimum prices.