Calculating net vat is critical to understand your actual costs

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 very important to understand 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 together with your vat returns vat validation.

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

It is thus imperative that you calculate the net vat on each products or services so that you will 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 instance, in case your business is situated in the United Kingdom then you could be subject to a standard vat rate of 17.5% that may switch to 20% after January 4, 2011. There is 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 actual vat amount on each product or service.

If you have sold a product for ?100 excluding vat then you'll have to add 17.5% vat provided the product attracts the regular vat rate. Your net vat rate will now be ?17.50 while your gross amount including vat will likely be ?117.50. The net rate of vat will have to be specified by your vat invoice as well as your vat returns too. However, to be able to charge and collect vat you'll have to get a own unique vat number which will need to be shown 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 during the past 12 months.

You can also claim the actual amount of vat paid on imported services or goods should they have already been paid in the country of origin. You should use the services of a competent vat, customs and excise duties agent or consultant that 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 a product or service vat control.

It is crucial to know about each factor that contributes towards cost of your product or service. This may enable you to generate the maximum amount of profits and also keep a strict eye on indirect and direct expenses that affect your business. Calculating net vat is indeed very important to know your actual costs so that you can sell your products and services at optimum prices.