The chances of usa vat being implemented increases with deficit

The United States of America has continued with its version of Sales Tax system in taxing goods and services but the chances of usa vat being implemented increases with deficit levels rising beyond uncomfortable levels. Most of Europe along with several developed and developing countries have adopted vat for taxing goods and services, and the US is seriously thinking of embracing this method to raise vital tax revenues.

For years, the US has stuck to its version of Sales Tax or Retail Tax where the end user is the only one subjected to tax on goods and services. The tax rates in the US are also quite low and usually peak at around 13% while vat or value added tax rates in some countries are as high as 25%. In addition, while sales tax is applied only once, vat is applied each time goods or services change hands, although there are provisions for vat refunds in the system. However, with the yearly US budget deficit running clearly over a trillion dollars, and rising with each passing year, proponents of vat are getting aggressive on implementing vat in the country in the coming years.

On the other hand, politicians fear that implementing usa vat could raise prices and pose a problem for the already-burdened common man, and in turn lead to reduced consumption of goods and services. Thus, not many in the current administration are willing to pursue the idea of bringing vat into the country. Most people agree, though that vat does promise to raise revenues while plugging tax leaks to a great extent.

In case the US does implement vat just as it has been done in the UK or other European countries then traders will need to apply for vat registration once they cross over the vat threshold figure. Each vat registered trader will then need to make a vat invoice that clearly mentions the vat number and the applicable vat rates on goods and services. In addition, traders will also need to file regular vat returns and could claim back vat refunds for vat amounts already paid. Even though the system sounds complex, in reality, it is quite simple to follow once traders get the hang of it, even as the government reaps higher tax revenues with each passing transaction.

It might take several years for usa vat to ultimately be implemented in the country as politicians and economists try to explore other avenues to close the huge deficit. This includes cutting down on expenses or levying additional taxes on certain goods or certain sections of society. However, more people seem to be open to the idea of introducing vat into the US after looking at other countries that have managed to boost their tax revenues due to vat. Maybe, only time and an unbearable deficit could usher in vat into the USA within the next few years.

While most other countries including Europe have shifted to vat in a bid to collect more taxes on goods and services, the US has remained loyal to its own version of Sales Tax. However, growing deficit and an inability to control expenses could soon see usa vat being ushered into the country, especially if the powers-to-be decide to take a concrete step in that direction.

Claim reverse charge vat on services where vat has already been paid

If you are a vat registered trader in the UK then you can avoid the problem of double taxation on services utilized from foreign companies when you claim reverse charge vat on services where vat has already been paid. This vat procedure will allow you to first pay vat and then cancel it out so that your net cost does not increase.

If you are a trader that utilizes services of foreign companies, especially those located in vat-friendly eu countries then you might have already paid vat in those countries. On the other hand, you might also have received such services in the UK itself from a supplier located in a eu country. All these factors would end up boosting your expenses since you might end up paying vat on certain services including those related to land, property, intra EC-freight services, and other such services as defined by the HM Revenue and Customs or hmrc department in conjunction with the European Community simplification regulations.

If you have a little difficulty in interpreting these vat rules then you should enrol the services of a competent customs and excise customs vat agent with a wide reach in most eu countries that practise vat. Such an agent would surely understand all uk vat and eu vat regulations and could help you to claim reverse charge vat that might have already been paid to a foreign company located in another country including a vat-friendly eu country.

You can reclaim vat already paid for specified services while filing your vat returns itself. If you are in the UK then you will need to calculate and indicate the amount of vat paid in Box 1 of your vat return form. You will then need to specify the same amount in Box 4 of that return so that the amount stands cancelled. You will also need to specify the full amount of the supply in Box 6 and 7 of the vat return form so as to complete your reverse charge vat claim. However, you will need to convert the currency of any vat paid in a foreign country to sterling before you fill in the amounts in those boxes.

This reverse charge process is also known as tax shift and you can go in for such a vat reclaim only if you are a vat registered trader in the UK. In order to become a vat registered trader, your taxable sales need to cross over £70,000 in the previous 12 months although you can even apply before this vat threshold amount has been achieved. Once you start charging vat to your customers and file regular vat returns then any services rendered by you from a foreign company can be reclaimed back in future vat returns, provided you follow all necessary guidelines issued by hmrc vat department.

Although following vat rules are not very difficult, it is always better to opt for the services of a proficient vat agent that can handle all your vat requirements seamlessly. This will allow you to concentrate on increasing your business while your vat agent files for reverse charge vat and recovers your taxes that have already been paid for services rendered by a foreign company within or outside the UK.

Calculating net vat is very important to know your actual costs

If you sell goods or services 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 actual vat paid or collected over the actual product or service and 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 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 under the vat system then you should certainly know about the tax component in your final costing of your goods and services.

It is thus important to calculate the net vat on each product or service so that you arrive at 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 UK then you could be subject to 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 goods and services while some goods or services 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 decide on the exact vat amount on each product or service.

If you have sold a product for £100 excluding vat then you will need to add 17.5% vat provided the product 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 your own unique vat number that will have to be displayed on each vat document. You can turn into a vat registered trader by filling in an appropriate application vat form after your taxable sales have touched £70,000 in the past 12 months.

You can also claim the actual amount of vat paid on imported goods or services if they have already been paid in the country of origin. You should use the services of a competent vat, customs and excise duties agent or consultant that 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 always be based on the actual percentage of vat on a product or service.

It is very important to know about each factor that contributes towards the cost of your product or service. This will allow you to earn the maximum amount of profits as well as keep a strict eye on direct and indirect 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.