Let’s say you sell goods or services in the UK or import them from other countries before selling them then calculating net VAT is very important to know your actual costs. This vat amount represents the exact vat paid or collected on the actual product or service and 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 services and products in a bid check vat number to avoid multiple taxation on products or services. Vat also 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 you then should know of the tax component within your final costing of your goods and services.
It’s thus important to calculate the net vat on each product or service 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 instance, in case your business is situated in the United Kingdom then you might be governed by 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 products or 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 decide on the actual vat amount on each service or product.
In case you have sold a product for ?100 excluding vat then you will 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 along with your vat returns too. However, to be able to charge and collect vat you’ll have to get your own unique vat number which will have to be displayed on each vat document. You can turn into a vat registered trader by filling in the proper application vat form after your taxable sales have touched ?70,000 during the past 12 months.
You may also claim the actual amount of vat paid on imported goods or services if they have been recently paid in the nation of origin. You should use the services of a competent vat, customs and excise duties agent or consultant that 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 very important to know about each component that contributes towards the cost of your products or services. This may allow you to generate the maximum amount of profits as well as 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 products and services at optimum prices.