Calculating net vat is critical to understand your actual costs

If you sell services or goods in the United Kingdom or import them from other countries before selling them then calculating net VAT is very important to know your actual costs. This vat amount represents the exact vat paid or collected on the actual product or service and 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 services and products in a bid to avoid multiple taxation on products or services. Vat also checkvatnumber.com 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 you then should know of the tax component in your final costing of the goods and services.

It is thus important to calculate the net vat on each product or service so that you will arrive at 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 instance, if your business is situated in the UK then you could be governed by a regular vat rate of 17.5% that will change to 20% after January 4, 2011. There’s also a reduced vat rate of 5% on certain goods and 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 will ultimately determine the exact vat amount on each product or service.

If you have sold a product for ?100 excluding vat then you’ll 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 along with your vat returns too. However, to be able to charge and collect vat you will have to get your own unique vat number which will need to be shown on each vat document. It is possible to turn into a vat registered trader by filling in the proper application vat form after your taxable sales have touched ?70,000 in the past Twelve months.

You can also claim the actual amount of vat paid on imported services or goods if they have been recently paid in the country of origin. You should utilize the services of a qualified vat, customs and excise duties agent or consultant that has complete understanding 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 know about each component that contributes towards the cost of your product or service. This may enable you to earn the maximum amount of profits and also keep a strict eye on indirect and direct expenses that affect your business. Calculating net vat is definitely very important to know your actual costs so that you can sell your products and services at optimum prices.