If you sell goods or services 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 on the actual product or service and definately will have to be shown separately in your vat invoice together with your vat returns.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted to vat or vat as a system of taxing products and services in a bid to prevent multiple taxation on products or services. Vat also vatvalidation prevents tax evasion to a great extent as compared to earlier systems. However, if you’re a trader or manufacturer that buys and sells goods within the vat system then you should know of the tax component in your final costing of the products or services.
It’s thus important to calculate the net vat on each products or services so that you arrive at 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 business is situated in the United Kingdom then you might be subject to a standard vat rate of 17.5% that may change to 20% after January 4, 2011. There’s also a reduced vat rate of 5% on certain products or services while some goods or services 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 could ultimately decide on the actual vat amount on each service or product.
If you have sold a product for ?100 excluding vat then you will have 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 likely be ?117.50. The net rate of vat will need to be specified in your vat invoice along with your vat returns too. However, in order to charge and collect vat you will have to get a 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 the proper application vat form after your taxable sales have touched ?70,000 during the past Twelve months.
You can also claim the exact amount of vat paid on imported services or goods if they have already been paid in the country of origin. You should use the services of a qualified vat, customs and excise duties agent or consultant that has complete understanding of uk vat and eu vat rules, especially 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 based on the actual percentage of vat on the product or service.
It is very important to understand each component that contributes towards cost of your products or services. This will enable you to generate the maximum level of profits as well as keep a strict eye on direct and indirect expenses affecting your business. Calculating net vat is indeed very important to understand your actual costs so that you can sell your product or service and services at optimum prices.