If 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 actual vat paid or collected over the actual service or product and will have 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 value added tax as being a system of taxing products and services in a bid to prevent multiple taxation on goods and services. Vat also vatcontrol.com/vat prevents tax evasion to a degree compared to earlier systems. However, if you’re a trader or manufacturer that buys and sells goods under the vat system then you should know about the tax component within your final costing of the goods and services.
It’s thus important to calculate the net vat on each products or services so that you arrive at 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, if your organization is situated in the UK then you could be governed by a standard 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 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 could ultimately decide on the exact vat amount on each service or product.
If you have sold a product for ?100 excluding vat then you will need to add 17.5% vat provided the product 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 need to be specified in your vat invoice along with your vat returns too. However, to be able to charge and collect vat you’ll have to get your own unique vat number that 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 in the past Twelve months.
You can also claim the exact amount of vat paid on imported services or goods should they have been recently paid in the nation of origin. You should use the services of a competent vat, customs and excise duties agent or consultant that has complete understanding 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 always be based on the actual percentage of vat on a products or services.
It is very important to understand each component that contributes towards price of your product or service. This will allow you to generate the maximum level of profits as well as keep a strict eye on indirect and direct expenses that affect your enterprise. Calculating net vat is indeed essential to know your actual costs so that you can sell your products and services at optimum prices.