Let’s say you sell goods or services in the UK 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 service or product and will need to be shown separately with your vat invoice as well as your vat returns.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted over 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 https://vatcontrol.com/vat prevents tax evasion to a great extent compared to earlier systems. However, if you’re a trader or manufacturer that buys and sells goods within the vat system you then should certainly know about the tax component within your final costing of the products or services.
It is thus important to calculate the net vat on each products or services 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 example, in case your business is situated in the UK then you could be governed by a standard 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 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 will ultimately determine the actual vat amount on each product or service.
In case you have sold a product for ?100 excluding vat then you’ll have 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 be ?117.50. The net rate of vat will have to be specified in your vat invoice as well as 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. You can 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 can also claim the actual amount of vat paid on imported goods or services should they have already been paid in the nation of origin. You should use the services of a qualified vat, customs and excise duties agent or consultant who has complete understanding of uk vat and eu vat rules, particularly 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 the products or services.
It is very important to understand each factor that contributes towards cost of your product or service. This may enable you to generate 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 definitely very important to understand your actual costs to be able to sell your product or service and services at optimum prices.