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 over the actual service or product 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 value added tax as a system of taxing services and products in a bid to prevent multiple taxation on products or services. Vat also prevents tax evasion to a great extent as compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods under the vat system then you should know of the tax component within your final costing of the goods and services.
It is thus important to calculate the net vat on each products or services so that you will come to 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, in case your organization is located in the UK then you could be http://vatvalidation.com/vat governed by a standard vat rate of 17.5% that will change to 20% after January 4, 2011. There’s also a reduced vat rate of 5% on certain products or services while some 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 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 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 along with your vat returns too. However, in order to charge and collect vat you’ll have to get a own unique vat number which will need to be displayed on each vat document. You can turn into a vat registered trader by filling out an appropriate application vat form after your taxable sales have touched ?70,000 during the past 12 months.
You can also claim the exact amount of vat paid on imported services or goods should they have already been paid in the nation of origin. You should utilize the services of a qualified vat, customs and excise duties agent or consultant that has complete understanding 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 based on the actual percentage of vat on the products or services.
It is very important to understand each factor that contributes towards price of your product or service. This may allow you to generate the maximum amount of profits and also keep a strict eye on indirect and direct expenses that affect your enterprise. 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.