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 essential to know your actual costs. This vat amount represents the exact vat paid or collected on the actual service or product and will need to be shown separately in 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 a system of taxing products and services in a bid to avoid multiple taxation on goods and services. Vat also checkvatnumber 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 then you should know of the tax component within your final costing of the goods and services.
It is thus imperative that you 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, if your organization is situated in the UK then you could be subject to a regular 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 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 determine the actual vat amount on each product or service.
If you have sold an item for ?100 excluding vat then you’ll have to add 17.5% vat provided the item attracts the standard vat rate. Your net vat rate will now be ?17.50 while your gross amount including vat will likely be ?117.50. The net rate of vat will need to be specified by your vat invoice as well as your vat returns too. However, in order to charge and collect vat you will have to get a 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 the proper application vat form after your taxable sales have touched ?70,000 during the past 12 months.
You may also claim the exact amount of vat paid on imported services or goods if they have already been paid in the country of origin. You should use the assistance 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 in accordance with the actual percentage of vat on the product or service.
It is very important to understand each component that contributes towards the cost of your product or service. This may enable you to generate the maximum amount of profits and also keep a strict eye on indirect and direct expenses affecting your enterprise. Calculating net vat is definitely essential to understand your actual costs to be able to sell your product or service and services at optimum prices.