If you sell services or goods in the United Kingdom 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 exact vat paid or collected over the actual service or product and 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 vat as being a system of taxing products and services in a bid to prevent multiple taxation on products or services. Vat also checkvatnumber.com 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 certainly know about the tax component within your final costing of the goods and services.
It is thus imperative that you calculate the net vat on each product or service so that you will 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 instance, in case your business is located in the UK then you might be subject to 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 products or services while some goods or services 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 could ultimately decide on the exact vat amount on each product or service.
In case you have sold a product 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 likely be ?117.50. The net rate of vat will have to be specified by 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 12 months.
You may also claim the exact amount of vat paid on imported goods or services should they have been recently paid in the nation of origin. You should use the services of a qualified vat, customs and excise duties agent or consultant who has complete knowledge 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 always be based on the actual percentage of vat on the product or service.
It is crucial to understand each factor that contributes towards price of your product or service. This will allow you to earn 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 products and services at optimum prices.