If you sell goods or services in the UK or import them from other countries before selling them then calculating net VAT is essential to know your actual costs. This vat amount represents the exact vat paid or collected on the actual service or product and definately will have to be shown separately with your vat invoice together with 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 avoid multiple taxation on products or services. Vat also www.vatvalidation.com prevents tax evasion to a great extent 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 of the tax component within your final costing of the products or services.
It’s thus important to calculate the net vat on each product or service 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, if your organization is located in the UK then you could be governed by a regular vat rate of 17.5% that may switch to 20% after January 4, 2011. There’s also a reduced vat rate of 5% on certain products or services while some 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 product or service.
If you have sold an item for ?100 excluding vat then you will need to add 17.5% vat provided the item 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 need to be specified in your vat invoice as well as your vat returns too. However, to be able to charge and collect vat you will have to get a own unique vat number that will have to be shown on each vat document. It is possible to turn into a vat registered trader by filling out an appropriate 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 services or goods should they have already been paid in the country of origin. You should utilize the services of a competent 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 always be based on the actual percentage of vat on the product or service.
It is crucial to know about each component that contributes towards cost of your products or services. This will allow you to generate the maximum level of profits and also keep a strict eye on direct and indirect expenses that affect your business. Calculating net vat is indeed very important to understand your actual costs to be able to sell your products and services at optimum prices.