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 know your actual costs. This vat amount represents the exact vat paid or collected over the actual product or service and definately 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 to avoid multiple taxation on products or services. Vat also prevents tax evasion to a degree compared to earlier http://vatcontrol.com/vat systems. However, if you’re a trader or manufacturer that buys and sells goods within the vat system you then should certainly know of the tax component in your final costing of your products or services.
It is thus imperative that you calculate the net vat on each product or service 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, in case your business is situated in the UK then you might be subject to 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 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 determine the actual 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 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 your own unique vat number that will need 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 in the past Twelve months.
You may also claim the exact amount of vat paid on imported services or goods if 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 that has complete knowledge 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 factor that contributes towards the price of your product or service. 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 very important to know your actual costs so that you can sell your products and services at optimum prices.