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 know your actual costs. This vat amount represents the actual vat paid or collected on the actual product or service and definately 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 vat as being a system of taxing services and products in a bid checkvatnumber to avoid multiple taxation on products or 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 you then should certainly know of the tax component within your final costing of the products or services.
It’s thus important to calculate the net vat on each product or service so that you will 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 example, if your business is situated in the UK then you might be governed by a standard vat rate of 17.5% that will switch to 20% after January 4, 2011. There’s 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 will ultimately decide on the exact vat amount on each service or product.
If you have sold an item 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 have 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 a 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 12 months.
You may also claim the exact amount of vat paid on imported services or goods if they have already been paid in the country of origin. You should utilize the services of a qualified vat, customs and excise duties agent or consultant who has complete understanding of uk vat and eu vat rules, especially 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 always be based on the actual percentage of vat on a product or service.
It is crucial to know about each component that contributes towards cost of your product or service. This will allow you to earn the maximum level of profits and also keep a strict eye on indirect and direct expenses that affect your business. Calculating net vat is indeed essential to understand your actual costs so that you can sell your product or service and services at optimum prices.