Let’s say you sell services or goods in the UK or import them from other countries before selling them then calculating net VAT is essential to understand your actual costs. This vat amount represents the exact vat paid or collected on 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 products and services in a bid to prevent multiple taxation on products or services. Vat also prevents tax evasion to a degree compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods within the vat system then you should know about the tax component within your final costing of your goods and services.
It is thus important to calculate the net vat on each products or services 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 example, in case your organization is located in the United Kingdom then you could be http://vatvalidation.com/vat subject to a regular 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 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 will ultimately determine the exact vat amount on each service or product.
If you have sold an item for ?100 excluding vat then you’ll 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 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, 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 during the past Twelve months.
You may also claim the exact amount of vat paid on imported goods or services if they have been recently paid in the country of origin. You should utilize the services 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 be in accordance with the actual percentage of vat on the product or service.
It is crucial to know about each factor that contributes towards the cost of your products or services. This will allow you to generate the maximum level of profits and also keep a strict eye on indirect and direct expenses affecting your enterprise. Calculating net vat is indeed essential to know your actual costs to be able to sell your products and services at optimum prices.