Let’s say 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 know your actual costs. This vat amount represents the actual vat paid or collected on the actual service or product and will need to be shown separately in your vat invoice together with your vat returns vat verification.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted over to vat or vat as a system of taxing services and products in a bid to avoid multiple taxation on products or 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 under the vat system then you should certainly know of the tax component in your final costing of the products or services.
It’s thus important to 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, if your business is located in the United Kingdom then you could be governed by a standard vat rate of 17.5% that may switch to 20% after January 4, 2011. There’s also a reduced vat rate of 5% on certain products or 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 service or product.
If you have sold an item for ?100 excluding vat then you will need to add 17.5% vat provided the product attracts the standard 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 a own unique vat number which will need to be shown on each vat document. It is possible to 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 actual amount of vat paid on imported goods or services 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 understanding of uk vat and eu vat rules, particularly 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 always be based on the actual percentage of vat on the products or services vies.
It is very important to know about each component that contributes towards cost of your product or service. This will allow you to earn the maximum amount of profits and also keep a strict eye on direct and indirect expenses affecting your business. Calculating net vat is indeed very important to know your actual costs so that you can sell your products and services at optimum prices.