If you sell services or goods in the United Kingdom or import them from other countries before selling them then calculating net VAT is very important to understand your actual costs. This vat amount represents the actual vat paid or collected on the actual service or product and will have 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 being a system of taxing services and products in a bid check vat number to avoid multiple taxation on products or services. Vat also prevents tax evasion to a degree compared to earlier systems. However, if you’re a trader or manufacturer that buys and sells goods within the vat system then you should certainly 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 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 organization is located in the United Kingdom then you might be subject to a regular vat rate of 17.5% that may change to 20% after January 4, 2011. There’s also a reduced vat rate of 5% on certain goods and services while many 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 decide on the exact 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 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’ll have to get a own unique vat number which 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 in the past Twelve months.
You may also claim the actual amount of vat paid on imported goods or services should they have already been paid in the nation of origin. You should utilize the assistance of a competent vat, customs and excise duties agent or consultant who has complete understanding 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 always be based on the actual percentage of vat on the products or services.
It is very important to know about each factor that contributes towards the price of your product or service. This may enable you to generate the maximum amount of profits as well as keep a strict eye on indirect and direct expenses affecting your enterprise. Calculating net vat is indeed very important to understand your actual costs so that you can sell your product or service and services at optimum prices.