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Calculating net vat is critical to understand your actual costs


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Let’s say you sell goods or services in the UK 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 actual vat paid or collected on the actual product or service and will need to be shown separately in your vat invoice as well as your vat returns check vat number.

Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted over to vat or value added tax as a system of taxing services and products 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’re a trader or manufacturer that buys and sells goods within the vat system then you should certainly know of the tax component within your final costing of your products or services.

It’s thus imperative that you calculate the net vat on each products or services so that you 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 example, if your organization is situated in the UK then you might be governed by 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 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 determine 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 need to be specified in your vat invoice as well as your vat returns too. However, in order to charge and collect vat you will have to get a 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 out an appropriate application vat form after your taxable sales have touched ?70,000 in the past Twelve months.

You can also claim the exact amount of vat paid on imported goods or services should they have been recently paid in the country of origin. You should use the services of a competent vat, customs and excise duties agent or consultant who 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 always be based on the actual percentage of vat on a products or services vies.

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 indirect and direct expenses affecting your enterprise. Calculating net vat is indeed very important to know your actual costs so that you can sell your product or service and services at optimum prices.