Calculating net vat is critical 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 exact vat paid or collected on the actual product or service and will have to be shown separately with 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 services and products in a bid checkvatnumber.com to prevent multiple taxation on products or 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 know about the tax component within your final costing of your products or services.

It's thus imperative that you calculate the net vat on each product or service so that you will 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, if your organization is situated in the United Kingdom then you might be subject to a standard 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 could ultimately determine the actual vat amount on each service or product.

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 now 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 along with your vat returns too. However, in order to charge and collect vat you will have to get your own unique vat number that will need to be displayed 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 during the past 12 months.

You may also claim the exact amount of vat paid on imported goods or services should they have already been paid in the country of origin. You should utilize the services of a qualified vat, customs and excise duties agent or consultant that has complete knowledge of uk vat and eu vat rules, especially 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 be in accordance with the actual percentage of vat on a product or service.

It is very important to understand each component that contributes towards the price of your products or services. This may allow 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 understand your actual costs so that you can sell your products and services at optimum prices.