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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 know 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 with your vat invoice together with 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 products and services in a bid to prevent multiple taxation on goods and services. Vat also prevents tax evasion to a degree 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 know of the tax component within your final costing of the goods and services.

It is thus important to calculate the net vat on each product or service 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 organization is situated in the United Kingdom then you could be www.vatvalidation.com/vat governed by a standard vat rate of 17.5% that will change to 20% after January 4, 2011. There is also a reduced vat rate of 5% on certain products or services while many 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 will ultimately determine the actual vat amount on each service or product.

If you have sold an item for ?100 excluding vat then you will need 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 have to be specified in 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 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 in the past Twelve months.

You may also claim the exact amount of vat paid on imported goods or services should they have been recently paid in the nation 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, 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 a products or services.

It is crucial to understand each component that contributes towards the cost of your products or services. This will allow you to earn the maximum amount of profits as well as 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.