Calculating net vat is very important to know 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 essential to understand your actual costs. This vat amount represents the actual vat paid or collected over the actual product or service and will have to be shown separately in your vat invoice as well as your vat returns vat number.

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 prevent multiple taxation on goods and services. Vat also prevents tax evasion to a degree 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 within your final costing of your goods and services.

It is thus important to 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 instance, in case your organization is located in the United Kingdom then you could be 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’ll need to add 17.5% vat provided the product attracts the regular 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 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 that will have to be displayed on each vat document. You can 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 may 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 utilize 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 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 based on the actual percentage of vat on the products or services vat verification.

It is very important to understand each component that contributes towards the price of your product or service. This will enable you to generate the maximum amount of profits and also keep a strict eye on indirect and direct expenses affecting your enterprise. Calculating net vat is indeed very important to know your actual costs to be able to sell your product or service and services at optimum prices.