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Calculating net vat is critical to know your actual costs


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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 will have to be shown separately with your vat invoice as well as your vat vat check returns.

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

It’s thus important to calculate the net vat on each product or service so that you will arrive at 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, if your organization is situated in the United Kingdom then you could be subject to a regular 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 many 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 exact vat amount on each product or service.

In case you have sold an item 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 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, in order to charge and collect vat you will have to get a own unique vat number that will have to be displayed on each vat document. It is possible to 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 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 use the assistance 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 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 based on the actual percentage of vat on the product or service.

It is crucial to know about each component that contributes towards the price of your products or services. This will enable you to earn the maximum level of profits as well as keep a strict eye on direct and indirect expenses that affect your business. Calculating net vat is definitely essential to understand your actual costs to be able to sell your products and services at optimum prices.