Calculating net vat is critical to know your actual costs

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 understand your actual costs. This vat amount represents the exact vat paid or collected over the actual service or product and definately 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 value added tax as 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 degree as 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 your products or services.

It’s thus important to calculate the net vat on each products or services 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 regular 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 goods and services while many services or goods 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 will ultimately decide on the exact vat amount on each service or product.

In case you have sold a product for ?100 excluding vat then you’ll need 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 have to be specified in your vat invoice along with your vat returns too. However, in order to charge and collect vat you’ll have to get your own unique vat number that will need to be displayed on each vat document. It is possible to turn into a vat registered trader by filling in 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 services or goods 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 who has complete knowledge of uk vat and eu vat rules, particularly 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 in accordance with the actual percentage of vat on the product or service.

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