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 essential 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 in 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 avoid multiple taxation on products or services. Vat also prevents tax evasion to a great extent as compared to earlier vatcontrol.com/vat systems. However, if you are a trader or manufacturer that buys and sells goods within the vat system then you should certainly know about the tax component in your final costing of your products or 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 located in the United Kingdom then you might be governed by a standard vat rate of 17.5% that will change 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 either vat exempt or attract zero vat. The hmrc vat department or hm revenue and customs department has provided for 14,000 classifications that could ultimately decide on the actual vat amount on each service or product.
In case you have sold an item for ?100 excluding vat then you will need to add 17.5% vat provided the item attracts the regular vat rate. Your net vat rate will now be ?17.50 while your gross amount including vat will be ?117.50. The net rate of vat will have 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 which will have to be shown on each vat document. It is possible to 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 Twelve months.
You can also claim the exact amount of vat paid on imported goods or services should they have been recently paid in the country of origin. You should utilize the assistance of a qualified vat, customs and excise duties agent or consultant that has complete knowledge of uk vat and eu vat rules, particularly when you import goods and 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 products or services.
It is very important to understand each factor that contributes towards the price of your product or service. This may allow you to earn the maximum amount of profits and also keep a strict eye on direct and indirect expenses that affect your enterprise. Calculating net vat is indeed very important to know your actual costs to be able to sell your products and services at optimum prices.