If 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 understand your actual costs. This vat amount represents the exact vat paid or collected over the actual product or service and will need to be shown separately with your vat invoice as well as your vat returns vat number.
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 services and products in a bid to prevent multiple taxation on goods and services. Vat also prevents tax evasion to a great extent as compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods within the vat system you then should certainly know about the tax component within your final costing of your goods and services.
It is thus important to calculate the net vat on each products or services so that you arrive at 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 organization is located in the UK then you could be subject to a standard vat rate of 17.5% that will switch to 20% after January 4, 2011. There is also a reduced vat rate of 5% on certain products or services while some 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 exact vat amount on each service or product.
If you have sold an item for ?100 excluding vat then you'll need to add 17.5% vat provided the item attracts the standard 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, 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 may also claim the actual amount of vat paid on imported services or goods should 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, 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 be in accordance with the actual percentage of vat on the products or services vat control.
It is crucial to know about each factor that contributes towards the price of your product or service. This may allow you to generate the maximum amount of profits and also keep a strict eye on indirect and direct expenses that affect your business. Calculating net vat is definitely essential to know your actual costs so that you can sell your product or service and services at optimum prices.