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 very important 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 in your vat invoice together with 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 prevent multiple taxation on goods and services. Vat also prevents tax evasion to a great extent compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods within the vat system you then should know about the tax component within your final costing of the goods and services.
It is thus imperative that you calculate the net vat on each product or service so that you will come to 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 vatcheck.com/vat 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’s also a reduced vat rate of 5% on certain products or services while some 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 product or service.
If you have sold an item for ?100 excluding vat then you’ll have to add 17.5% vat provided the product attracts the standard 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 by your vat invoice along with your vat returns too. However, in order to charge and collect vat you will have to get your own unique vat number which will have to be shown on each vat document. You can turn into a vat registered trader by filling in an appropriate application vat form after your taxable sales have touched ?70,000 during the past Twelve months.
You may 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 utilize the assistance of a qualified vat, customs and excise duties agent or consultant that has complete understanding 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 in accordance with the actual percentage of vat on a products or services.
It is very important to understand each component that contributes towards the 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 direct and indirect expenses affecting your enterprise. Calculating net vat is indeed very important to know your actual costs so that you can sell your product or service and services at optimum prices.