If 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 actual vat paid or collected on the actual service or product and will have to be shown separately in 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 checkvatnumber to avoid multiple taxation on products or services. Vat also prevents tax evasion to a great extent compared to earlier systems. However, if you’re a trader or manufacturer that buys and sells goods under the vat system then you should certainly know about the tax component within your final costing of your goods and services.
It’s thus important to calculate the net vat on each products or services so that you 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 instance, in case your business is situated in the UK then you might be governed by a regular 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 goods and services while some 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 decide on the actual vat amount on each service or product.
If you have sold a product for ?100 excluding vat then you will 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 need 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 need to be shown on each vat document. It is possible to 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 12 months.
You can also claim the exact amount of vat paid on imported services or goods should they have already been 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 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 a products or services.
It is very important to understand each component that contributes towards the price of your products or services. This will enable you to earn the maximum level of profits and also keep a strict eye on indirect and direct expenses affecting your enterprise. Calculating net vat is indeed very important to know your actual costs so that you can sell your products and services at optimum prices.