Let’s say you sell services or goods in the United Kingdom 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 exact vat paid or collected on 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 to vat or vat as a system of taxing services and products in a bid to prevent multiple taxation on goods and services. Vat also prevents tax evasion to a degree compared to earlier vatcontrol.com/vat systems. However, if you’re a trader or manufacturer that buys and sells goods under the vat system you then should know about the tax component in your final costing of your products or services.
It is thus imperative that you calculate the net vat on each products or services so that you will 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 example, in case your business is located in the United Kingdom then you might be subject to a standard vat rate of 17.5% that may switch to 20% after January 4, 2011. There is also a reduced vat rate of 5% on certain products or services while many 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 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 need to add 17.5% vat provided the item attracts the regular vat rate. Your net vat rate will now 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 as well as your vat returns too. However, to be able to charge and collect vat you’ll have to get your own unique vat number which will need to be shown 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 12 months.
You can also claim the actual amount of vat paid on imported services or goods should they have been recently paid in the nation of origin. You should use the assistance of a qualified vat, customs and excise duties agent or consultant who has complete knowledge 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 always be based on the actual percentage of vat on the product or service.
It is very important to understand each factor that contributes towards cost of your products or services. This may enable you to earn the maximum level of profits and also keep a strict eye on direct and indirect expenses affecting your business. Calculating net vat is indeed very important to understand your actual costs to be able to sell your product or service and services at optimum prices.