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 service or product and will have 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 being a system of taxing products and services in a bid to avoid multiple taxation on goods and services. Vat also prevents tax evasion to a degree 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 about the tax component in your final costing of the goods and services.
It’s thus imperative that you calculate the net vat on each products or services so that you will 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 instance, in case your business is located in the UK then you might be www.vatvalidation.com/vat 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 services or goods 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 decide on the exact vat amount on each product or service.
If you have sold an item for ?100 excluding vat then you will need to add 17.5% vat provided the product attracts the regular vat rate. Your net vat rate will now 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 as well as your vat returns too. However, in order to charge and collect vat you will have to get a own unique vat number that will have to be displayed on each vat document. You can turn into a vat registered trader by filling out the proper application vat form after your taxable sales have touched ?70,000 during 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 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 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 products or services.
It is very important to understand each factor that contributes towards price of your product or service. This may allow you to generate the maximum amount of profits and also keep a strict eye on direct and indirect expenses that affect your enterprise. Calculating net vat is definitely essential to understand your actual costs to be able to sell your product or service and services at optimum prices.