Calculating net vat is very important to know your actual costs

If you sell goods or services 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 exact vat paid or collected over the actual service or product and definately will need 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 to vat or vat as being a system of taxing products and services in a bid to avoid 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 under the vat system then you should certainly know about the tax component within 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 come to accurate costs and also 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 vat check situated in the UK then you might be 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 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 decide on the exact vat amount on each product or service.

If you have sold an item for ?100 excluding vat then you will have to add 17.5% vat provided the item 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 by your vat invoice along with your vat returns too. However, in order 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 in the proper application vat form after your taxable sales have touched ?70,000 during the past Twelve months.

You may also claim the exact amount of vat paid on imported services or goods if they have been recently paid in the country of origin. You should utilize 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 the product or service.

It is very important to understand each factor that contributes towards price of your products or services. This will allow you to earn the maximum level of profits as well as keep a strict eye on indirect and direct expenses that affect your enterprise. Calculating net vat is indeed essential to understand your actual costs so that you can sell your product or service and services at optimum prices.