Let’s say you sell goods or services 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 on the actual service or product and definately will need to be shown separately in 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 a system of taxing services and products in a bid https://checkvatnumber.com 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 know of the tax component within your final costing of the goods and services.
It’s 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, in case your organization is situated in the UK then you could be subject to 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 goods and services while many 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 have to add 17.5% vat provided the product attracts the regular 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 along with your vat returns too. However, to be able to charge and collect vat you’ll have to get your own unique vat number that will have to be shown 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 12 months.
You may also claim the actual amount of vat paid on imported goods or services if they have already been paid in the nation of origin. You should use the services of a competent vat, customs and excise duties agent or consultant that 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 in accordance with the actual percentage of vat on the products or services.
It is very important to understand each factor that contributes towards the cost of your product or service. This may enable you to generate the maximum level of profits and also keep a strict eye on direct and indirect expenses affecting your business. Calculating net vat is indeed very important to understand your actual costs so that you can sell your product or service and services at optimum prices.