If you sell goods or services in the United Kingdom or import them from other countries before selling them then calculating net VAT is very important to know your actual costs. This vat amount represents the actual vat paid or collected over the actual product or service and definately will have to be shown separately with your vat invoice together with 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 avoid multiple taxation on goods and services. Vat also prevents tax evasion to a great extent compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods under the vat system you then should know of the tax component within your final costing of your products or services.
It is thus important to 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 situated in the United Kingdom then you could be vatvalidation.com/vat subject to a standard vat rate of 17.5% that will change to 20% after January 4, 2011. There is 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 will ultimately decide on the exact vat amount on each product or service.
If you have sold an item for ?100 excluding vat then you will need 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 by 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 shown on each vat document. It is possible to turn into a vat registered trader by filling in the proper 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 already been paid in the country of origin. You should utilize the assistance of a qualified vat, customs and excise duties agent or consultant that has complete knowledge 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 be in accordance with the actual percentage of vat on the product or service.
It is crucial to understand each component that contributes towards the cost of your products or services. This may enable you to earn the maximum amount 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 so that you can sell your products and services at optimum prices.