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 know your actual costs. This vat amount represents the exact vat paid or collected on the actual product or service and definately 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 being a system of taxing products and services in a bid to avoid vat check multiple taxation on products or services. Vat also prevents tax evasion to a great extent as compared to earlier systems. However, if you’re a trader or manufacturer that buys and sells goods under the vat system you then should certainly know about the tax component within your final costing of the goods and services.
It is thus important to calculate the net vat on each products or services 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, in case your business is located in the United Kingdom then you might be governed by a regular 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 products or 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 determine the exact vat amount on each product or service.
In case you have sold a product for ?100 excluding vat then you’ll have 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 have to be specified by your vat invoice as well as 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. 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 goods or services if they have been recently paid in the nation of origin. You should utilize the services of a qualified vat, customs and excise duties agent or consultant that 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 in accordance with the actual percentage of vat on the products or services.
It is crucial to know about each factor that contributes towards the price of your product or service. This may enable you to earn the maximum amount 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.