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Calculating net vat is very important to know your actual costs


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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 understand your actual costs. This vat amount represents the exact vat paid or collected on the actual service or product and will have to be shown separately in 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 being a system of taxing services and products in a bid to avoid multiple taxation on products or services. Vat also prevents tax evasion to a degree compared to earlier http://vatcontrol.com/vat systems. However, if you’re a trader or manufacturer that buys and sells goods within the vat system then you should know about the tax component in your final costing of the goods and services.

It’s thus important to calculate the net vat on each products or services 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 example, if your business is situated in the United Kingdom then you might be governed by a regular vat rate of 17.5% that will switch to 20% after January 4, 2011. There is also a reduced vat rate of 5% on certain goods and services while some services or goods are either 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.

In case you have sold an item for ?100 excluding vat then you will have to add 17.5% vat provided the item 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 need to be specified in your vat invoice as well as your vat returns too. However, to be able to charge and collect vat you’ll 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 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 goods or services should they have already been 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 understanding 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 always be based on the actual percentage of vat on the product or service.

It is crucial to understand each component that contributes towards cost of your products or services. This will enable you to generate 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 know your actual costs so that you can sell your product or service and services at optimum prices.