If 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 actual vat paid or collected on the actual product or service and definately 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 vat as a system of taxing services and products in a bid to prevent vatcheck multiple taxation on products or services. Vat also prevents tax evasion to a degree compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods under the vat system then you should know about the tax component in your final costing of the products or services.
It’s thus important to calculate the net vat on each products or services so that you 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 could be governed by a standard vat rate of 17.5% that may change to 20% after January 4, 2011. There is also a reduced vat rate of 5% on certain goods and 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 could ultimately determine the actual vat amount on each service or product.
If you have sold a product for ?100 excluding vat then you will need to add 17.5% vat provided the product attracts the regular 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 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 shown 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 can 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 utilize 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 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 a products or services.
It is crucial to know about each factor that contributes towards the cost of your products or services. This may enable you to earn the maximum amount of profits as well as keep a strict eye on indirect and direct expenses affecting your enterprise. Calculating net vat is definitely essential to understand your actual costs so that you can sell your products and services at optimum prices.