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Calculating net vat is very important to know 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 over the actual product or service and definately 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 value added tax as being a system of taxing services and products in a bid to avoid multiple taxation on goods and services. Vat also prevents tax evasion to a degree compared to earlier systems. However, if you’re a trader or manufacturer that buys and sells goods within the vat system you then should certainly know about the tax component within your final costing of your goods and services.

It is thus important to 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, if your business is http://vatcheck.com/vat located in the UK then you might be subject to a regular vat rate of 17.5% that may switch to 20% after January 4, 2011. There’s also a reduced vat rate of 5% on certain goods and services while many services or goods 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 actual vat amount on each service or product.

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 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 by your vat invoice as well as your vat returns too. However, in order to charge and collect vat you’ll have to get your own unique vat number which will have to be shown 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 in the past 12 months.

You may also claim the exact amount of vat paid on imported services or goods if they have already been paid in the country 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 in accordance with the actual percentage of vat on the product or service.

It is very important to understand each factor that contributes towards cost of your product or service. This will enable you to generate the maximum level 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 to be able to sell your product or service and services at optimum prices.