If you sell goods or services 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 actual vat paid or collected on the actual product or service and will have to be shown separately in 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 being a system of taxing products and services in a bid to avoid multiple taxation on goods and services. Vat also prevents tax evasion to a degree as compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods within the vat system then you should certainly know about the tax component within your final costing of the goods and services.
It's thus imperative that you calculate the net vat on each product or service 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 instance, in case your organization is situated in the UK then you might be www.vatvalidation.com/vat 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 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 product or service.
In case you have sold an item for ?100 excluding vat then you will need to add 17.5% vat provided the item attracts the regular vat rate. Your net vat rate will now be ?17.50 while your gross amount including vat will likely be ?117.50. The net rate of vat will have to be specified in your vat invoice along with your vat returns too. However, in order to charge and collect vat you'll have to get your own unique vat number which will have to be shown on each vat document. You can turn into a vat registered trader by filling in an appropriate application vat form after your taxable sales have touched ?70,000 in the past Twelve months.
You can also claim the actual amount of vat paid on imported goods or services should they have been recently paid in the nation of origin. You should utilize the assistance of a qualified vat, customs and excise duties agent or consultant who has complete knowledge of uk vat and eu vat rules, especially 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 product or service.
It is very important to understand each factor that contributes towards price of your product or service. This may enable you to earn the maximum level of profits as well as keep a strict eye on direct and indirect expenses affecting your business. Calculating net vat is indeed essential to know your actual costs so that you can sell your products and services at optimum prices.