If you sell services or goods in the UK or import them from other countries before selling them then calculating net VAT is very important to know your actual costs. This vat amount represents the exact vat paid or collected over the actual service or product and will need to be shown separately with your vat invoice together with 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 vat check to avoid multiple taxation on products or services. Vat also prevents tax evasion to a degree compared to earlier systems. However, if you're a trader or manufacturer that buys and sells goods under the vat system then you should know of the tax component within your final costing of the goods and services.
It's thus imperative that you calculate the net vat on each products or services 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 situated in the United Kingdom then you might be subject to a standard vat rate of 17.5% that may change 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 either 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.
In case you have sold a product for ?100 excluding vat then you will have 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 need to be specified in 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 displayed on each vat document. You can 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 12 months.
You can also claim the actual amount of vat paid on imported goods or services should they have already been paid in the nation of origin. You should use 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 be in accordance with the actual percentage of vat on the products or services.
It is very important to understand each component that contributes towards the cost of your product or service. This may enable you to generate the maximum level of profits as well as keep a strict eye on indirect and direct expenses affecting your business. Calculating net vat is definitely very important to understand your actual costs so that you can sell your products and services at optimum prices.