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 exact vat paid or collected over the actual product or service and definately will need to be shown separately in your vat invoice together with your vat returns vat validation.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted to vat or value added tax as being 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 systems. However, if you are a trader or manufacturer that buys and sells goods within the vat system you then 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 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 business is situated in the United Kingdom then you could be subject to a regular 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 products or services while many goods or services 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 actual 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 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 need to be specified in 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 that will have to be displayed on each vat document. You can turn into a vat registered trader by filling in an appropriate application vat form after your taxable sales have touched ?70,000 in the past 12 months.
You can also claim the actual amount of vat paid on imported goods or services should they have already been paid in the country of origin. You should use the services of a competent 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 based on the actual percentage of vat on the products or services vat check.
It is very important to understand each factor that contributes towards the price of your product or service. This may 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 definitely essential to know your actual costs to be able to sell your products and services at optimum prices.