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 will need to be shown separately with 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 goods and services. Vat also prevents tax evasion to a degree as compared to earlier https://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 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 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 organization is located in the UK then you might be subject to a regular 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 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 actual vat amount on each service or product.
In case you have sold an item for ?100 excluding vat then you will 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 by your vat invoice as well as your vat returns too. However, to be able to charge and collect vat you will have to get your own unique vat number which 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 12 months.
You may also claim the actual amount of vat paid on imported services or goods should 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 who has complete understanding 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 be in accordance with the actual percentage of vat on a product or service.
It is very important to know about each component that contributes towards the cost of your product or service. This will allow you to generate the maximum amount of profits and also keep a strict eye on indirect and direct expenses that affect your enterprise. Calculating net vat is definitely essential to understand your actual costs to be able to sell your products and services at optimum prices.