If 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 understand your actual costs. This vat amount represents the actual vat paid or collected over the actual product or service and will have to be shown separately with your vat invoice as well as your vat www.vatcheck.com/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 to avoid multiple taxation on goods and services. Vat also prevents tax evasion to a great extent as 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 the 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 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 located in the United Kingdom then you could be subject to a regular 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 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 decide on the exact vat amount on each product or service.
In case you have sold an item for ?100 excluding vat then you will have to add 17.5% vat provided the product attracts the regular 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 your own unique vat number which will need to be displayed on each vat document. You can turn into a vat registered trader by filling in an appropriate application vat form after your taxable sales have touched ?70,000 during the past Twelve months.
You may also claim the exact amount of vat paid on imported goods or services should they have been recently paid in the nation of origin. You should utilize the assistance of a qualified vat, customs and excise duties agent or consultant who has complete understanding of uk vat and eu vat rules, especially 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 be in accordance with the actual percentage of vat on the product or service.
It is crucial to understand each factor that contributes towards the price of your product or service. This may allow you to generate the maximum level of profits and also keep a strict eye on indirect and direct expenses that affect your business. Calculating net vat is indeed very important to know your actual costs to be able to sell your products and services at optimum prices.