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 actual vat paid or collected over the actual product or service 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 value added tax as a system of taxing services and products in a bid to prevent 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 then you should certainly know about the tax component within your final costing of your products or services.
It’s thus imperative that you calculate the net vat on each products or services so that you will come to accurate costs as well as calculate your profits correctly. Each eu state or country has different vat rate slabs that attract different percentages of vat. For example, in case your organization is vatcheck.com/vat located in the United Kingdom then you might be subject to a standard 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 goods and services while some goods or services 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 could ultimately decide on the actual vat amount on each service or product.
If you have sold an item 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 now be ?17.50 while your gross amount including vat will be ?117.50. The net rate of vat will have to be specified by your vat invoice along with your vat returns too. However, in order to charge and collect vat you’ll have to get a own unique vat number which will have to be shown on each vat document. It is possible to turn into a vat registered trader by filling in an appropriate application vat form after your taxable sales have touched ?70,000 in the past 12 months.
You can also claim the actual amount of vat paid on imported goods or services if they have been recently paid in the nation of origin. You should use the services of a qualified vat, customs and excise duties agent or consultant that 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 based on the actual percentage of vat on a products or services.
It is very important to understand each factor that contributes towards the cost of your product or service. This will allow you to earn the maximum amount 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 products and services at optimum prices.