Calculating net vat is very important to know 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 understand your actual costs. This vat amount represents the exact vat paid or collected over the actual product or service and definately will have 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 services and products in a bid to prevent multiple taxation on products or services. Vat also check vat number prevents tax evasion to a great extent compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods within the vat system then you should know of the tax component within 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 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 example, if your business is located in the UK then you could be subject to a standard 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 goods and 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 determine the exact vat amount on each service or product.

In case you have sold a product for ?100 excluding vat then you will need to add 17.5% vat provided the item attracts the regular 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 by your vat invoice as well as your vat returns too. However, in order to charge and collect vat you’ll have to get a own unique vat number that will have to be shown 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 Twelve months.

You can also claim the exact amount of vat paid on imported goods or services should they have already been paid in the country of origin. You should utilize the assistance 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 very important to understand each factor that contributes towards price of your product or service. This will enable you to generate the maximum level of profits and also keep a strict eye on indirect and direct expenses that affect your business. Calculating net vat is indeed very important to know your actual costs to be able to sell your products and services at optimum prices.