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Calculating net vat is very important to understand your actual costs


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Let’s say you sell services or goods 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 exact 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.

Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted to vat or vat as a system of taxing products and services in a bid to prevent multiple taxation on products or services. Vat also 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 know about the tax component within your final costing of the goods and services.

It’s thus imperative that you calculate the net vat on each products or services 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 example, in case your business is located in the UK then you could be http://vatvalidation.com/vat governed by a standard 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 either 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 determine the exact vat amount on each service or product.

If you have sold an item 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, 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. 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 12 months.

You may also claim the actual amount of vat paid on imported services or goods if they have already been paid in the nation of origin. You should utilize the assistance of a qualified vat, customs and excise duties agent or consultant who has complete knowledge of uk vat and eu vat rules, particularly when you import goods and 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 products or services.

It is crucial to understand each factor that contributes towards the price of your products or services. This may allow you to generate the maximum level of profits and also keep a strict eye on indirect and direct expenses affecting your business. Calculating net vat is definitely very important to understand your actual costs so that you can sell your products and services at optimum prices.