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 very important to understand your actual costs. This vat amount represents the actual vat paid or collected over the actual service or product and will have 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 value added tax as being a system of taxing products and services in a bid to prevent multiple taxation on goods and services. Vat also http://vatcontrol.com/vat prevents tax evasion to a degree as compared to earlier systems. However, if you're a trader or manufacturer that buys and sells goods within the vat system you then should know about the tax component within your final costing of the products or services.
It's thus imperative that you calculate the net vat on each product or service 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, in case your business is located in the United Kingdom then you could be governed by a regular vat rate of 17.5% that will switch to 20% after January 4, 2011. There's also a reduced vat rate of 5% on certain products or services while some 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 service or product.
If you have sold an item for ?100 excluding vat then you'll have to add 17.5% vat provided the item 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 along with your vat returns too. However, to be able to charge and collect vat you will have to get a 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 during the past Twelve months.
You may also claim the exact amount of vat paid on imported services or goods if they have been recently 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, 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 the cost of your products or services. This may enable you to earn the maximum level of profits and also keep a strict eye on indirect and direct expenses that affect your business. Calculating net vat is definitely very important to know your actual costs to be able to sell your product or service and services at optimum prices.