Let's say you sell services or goods in the UK or import them from other countries before selling them then calculating net VAT is essential to know your actual costs. This vat amount represents the actual vat paid or collected over the actual product or service 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 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 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 know about the tax component in your final costing of the products or services.
It is thus imperative that you 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 example, in case your business is located in the United Kingdom then you could be governed by a regular 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 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 exact 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 product attracts the regular vat rate. Your net vat rate will be ?17.50 while your gross amount including vat will likely be ?117.50. The net rate of vat will have to be specified by 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 need to be displayed on each vat document. You can turn into a vat registered trader by filling out an appropriate application vat form after your taxable sales have touched ?70,000 in the past Twelve months.
You may 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 services of a competent vat, customs and excise duties agent or consultant that 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 be based on the actual percentage of vat on the products or services.
It is very important to understand each component that contributes towards price of your products or services. This may enable you to generate the maximum level 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.