Let’s say you sell services or goods in the United Kingdom 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 actual vat paid or collected over the actual service or product and definately will have to be shown separately with your vat invoice as well as your vat returns vat validation.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted over to vat or vat as 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 as compared to earlier systems. However, if you’re a trader or manufacturer that buys and sells goods within the vat system you then should know about the tax component within your final costing of the goods and services.
It is thus important to calculate the net vat on each product or service so that you 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 instance, in case your organization is located in the UK then you could be subject to 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 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 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 standard vat rate. Your net vat rate will 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 as well as your vat returns too. However, to be able to charge and collect vat you’ll have to get your own unique vat number which will have to be displayed 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 during the past Twelve 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 use the assistance of a qualified vat, customs and excise duties agent or consultant who 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 always be in accordance with the actual percentage of vat on a products or services vies.
It is crucial to know about each factor that contributes towards cost of your product or service. This will enable you to earn the maximum amount of profits as well as keep a strict eye on direct and indirect expenses that affect your business. Calculating net vat is indeed essential to know your actual costs so that you can sell your product or service and services at optimum prices.