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 understand your actual costs. This vat amount represents the actual vat paid or collected on the actual service or product 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 over to vat or vat as a system of taxing products and services in a bid to avoid multiple taxation on products or services. Vat also prevents tax evasion to a great extent compared to earlier http://vatcontrol.com/vat systems. However, if you’re a trader or manufacturer that buys and sells goods under the vat system then you should certainly know of the tax component in your final costing of your products or services.
It is thus important to 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 instance, in case your organization is located in the UK then you might be subject to a regular 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 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 could ultimately determine the actual vat amount on each product or service.
If you have sold an item 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 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, to be able to charge and collect vat you’ll have to get a own unique vat number which 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 during the past Twelve months.
You can 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 use 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 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 products or services.
It is very important to understand each factor that contributes towards the price of your products or services. This may allow you to generate the maximum amount of profits as well as keep a strict eye on direct and indirect expenses affecting your enterprise. Calculating net vat is definitely very important to understand your actual costs so that you can sell your products and services at optimum prices.