Calculating net vat is critical to understand your actual costs

Let’s say you sell services or goods in the UK or import them from other countries before selling them then calculating net VAT is essential to understand 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 in 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 services and products in a bid www.checkvatnumber.com to prevent multiple taxation on goods and services. Vat also prevents tax evasion to a degree compared to earlier systems. However, if you are 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 the products or services.

It is thus imperative that you calculate the net vat on each product or service 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 organization is situated in the UK then you might be subject to a standard 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 products or services while some 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 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’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 need 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 your own unique vat number which will have to be shown on each vat document. You can turn into a vat registered trader by filling out the proper application vat form after your taxable sales have touched ?70,000 during the past 12 months.

You may also claim the exact amount of vat paid on imported goods or services should they have already been paid in the nation of origin. You should utilize 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 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 a products or services.

It is crucial to know about each factor that contributes towards cost of your products or services. This will allow you to earn the maximum amount of profits as well as keep a strict eye on indirect and direct expenses that affect your business. Calculating net vat is indeed very important to understand your actual costs to be able to sell your product or service and services at optimum prices.