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 exact 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 to vat or value added tax as 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 https://vatcontrol.com/vat systems. However, if you’re 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 your products or services.
It is thus imperative that you calculate the net vat on each product or service 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 situated 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 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 could ultimately decide on the exact vat amount on each service or product.
If you have sold an item for ?100 excluding vat then you will have to add 17.5% vat provided the product attracts the standard 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 in your vat invoice along with your vat returns too. However, to be able to charge and collect vat you’ll have to get a own unique vat number that will need to be displayed on each vat document. It is possible to turn into a vat registered trader by filling out the proper application vat form after your taxable sales have touched ?70,000 in the past 12 months.
You may also claim the actual amount of vat paid on imported goods or services if they have been recently paid in the nation of origin. You should utilize the services of a qualified vat, customs and excise duties agent or consultant that has complete knowledge of uk vat and eu vat rules, especially 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 in accordance with the actual percentage of vat on a product or service.
It is very important to understand each factor that contributes towards price of your product or service. This may enable you to generate the maximum amount 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 know your actual costs so that you can sell your products and services at optimum prices.