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Calculating net vat is critical to know your actual costs


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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 know 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 together with your vat returns.

Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted 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 checkvatnumber prevents tax evasion to a degree compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods within the vat system you then should certainly know about the tax component in your final costing of the goods and services.

It’s thus imperative that you calculate the net vat on each product or service 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 instance, in case your organization is situated in the United Kingdom then you could be subject to a regular vat rate of 17.5% that may change to 20% after January 4, 2011. There’s also a reduced vat rate of 5% on certain products or 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 will ultimately decide on the exact vat amount on each service or product.

If you have sold an item 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 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 along with your vat returns too. However, in order to charge and collect vat you will have to get a own unique vat number which will have 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 in the past Twelve months.

You can also claim the actual amount of vat paid on imported goods or services if 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 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 in accordance with the actual percentage of vat on a product or service.

It is crucial to understand each factor that contributes towards the cost of your products or services. This will allow you to earn the maximum amount of profits as well as keep a strict eye on direct and indirect expenses affecting your enterprise. Calculating net vat is indeed very important to understand your actual costs to be able to sell your products and services at optimum prices.