Calculating net vat is very important to understand your actual costs

If you sell services or goods in the UK 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 actual vat paid or collected on the actual product or service and definately 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 vat as a system of taxing products and services in a bid to avoid multiple taxation on goods and services. Vat also prevents tax evasion to a great extent as compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods under the vat system you then should certainly know of the tax component in your final costing of the products or services.

It’s thus imperative that you 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 instance, if your organization is situated in the UK then you could be vatvalidation.com/vat subject to a regular vat rate of 17.5% that may switch to 20% after January 4, 2011. There’s also a reduced vat rate of 5% on certain goods and 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 could ultimately decide on the actual vat amount on each product or service.

If 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 be ?17.50 while your gross amount including vat will be ?117.50. The net rate of vat will have 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 your own unique vat number that will need to be displayed on each vat document. You can 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 12 months.

You may 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 competent vat, customs and excise duties agent or consultant that 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 be in accordance with the actual percentage of vat on the product or service.

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