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 actual vat paid or collected on the actual product or service and definately 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 to vat or value added tax as being a system of taxing products and services in a bid to prevent multiple taxation on products or services. Vat also prevents tax evasion to a great extent compared to earlier vatcontrol.com/vat systems. However, if you’re a trader or manufacturer that buys and sells goods within the vat system you then should certainly know about the tax component in 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 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 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 switch to 20% after January 4, 2011. There is also a reduced vat rate of 5% on certain products or services while many services or goods 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.
In case you have sold an item for ?100 excluding vat then you will need to add 17.5% vat provided the product attracts the regular vat rate. Your net vat rate will be ?17.50 while your gross amount including vat will be ?117.50. The net rate of vat will have 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 shown on each vat document. It is possible to 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 Twelve months.
You can also claim the actual amount of vat paid on imported services or goods should they have been recently paid in the country of origin. You should use the services 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 always be based on the actual percentage of vat on a product or service.
It is crucial to understand each component that contributes towards 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 business. Calculating net vat is definitely essential to understand your actual costs so that you can sell your product or service and services at optimum prices.