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 actual vat paid or collected over the actual service or product 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 over to vat or value added tax as being a system of taxing products and services in a bid to avoid multiple taxation on products or services. Vat also http://vatcontrol.com/vat 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 about the tax component within your final costing of your products or services.
It is thus important to calculate the net vat on each product or service so that you will 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 instance, in case your business 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 goods and services while some 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 determine the actual vat amount on each product or service.
If you have sold a product for ?100 excluding vat then you will have to add 17.5% vat provided the item 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 have to be specified by your vat invoice along with your vat returns too. However, to be able to charge and collect vat you will have to get your own unique vat number that will have 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 in the past Twelve months.
You may also claim the actual 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 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 be based on the actual percentage of vat on the product or service.
It is very important to know about each component that contributes towards cost of your product or service. This will allow you to generate the maximum level of profits and also keep a strict eye on direct and indirect expenses that affect your business. 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.