Let’s say you sell goods or services in the United Kingdom 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 exact vat paid or collected on the actual product or service and will have 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 over to vat or value added tax as being 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 systems. However, if you are a trader or manufacturer that buys and sells goods under the vat system you then should certainly know about the tax component in your final costing of the products or services.
It is thus imperative that you calculate the net vat on each products or services 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, if your business is located in the United Kingdom then you might be www.vatvalidation.com/vat governed by a standard vat rate of 17.5% that will 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 decide on the actual vat amount on each service or product.
If you have sold a product for ?100 excluding vat then you’ll have to add 17.5% vat provided the product attracts the standard 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 will have to get your own unique vat number which will need to be displayed on each vat document. It is possible to turn into a vat registered trader by filling out the proper application vat form after your taxable sales have touched ?70,000 during the past Twelve months.
You may also claim the actual amount of vat paid on imported goods or services should they have been recently paid in the nation 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 be in accordance with the actual percentage of vat on the product or service.
It is crucial to understand each component that contributes towards price of your product or service. This will enable you to earn the maximum amount of profits as well as keep a strict eye on indirect and direct expenses that affect your enterprise. Calculating net vat is indeed essential to understand your actual costs so that you can sell your product or service and services at optimum prices.