Calculating net vat is critical to understand your actual costs

Let’s say you sell goods or services in the UK 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 on the actual service or product and definately will need 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 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 vatcontrol.com/vat prevents tax evasion to a great extent compared to earlier systems. However, if you’re a trader or manufacturer that buys and sells goods under the vat system then you should know of the tax component in your final costing of the products or services.

It’s thus important to calculate the net vat on each product or service so that you 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, if your business is situated in the UK then you could be subject to a standard vat rate of 17.5% that may change to 20% after January 4, 2011. There is also a reduced vat rate of 5% on certain products or services while some 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 product or service.

In case you have sold a product 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 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 as well as your vat returns too. However, in order to charge and collect vat you’ll have to get your own unique vat number which will need to be displayed 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 during the past Twelve 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 assistance 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 based on the actual percentage of vat on the product or service.

It is very important to understand each component that contributes towards the cost of your product or service. This may enable you to generate the maximum level of profits as well as keep a strict eye on direct and indirect expenses affecting your enterprise. 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.