Vat- How do I calculate it?

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EmmaJ

Guest
Hi guys..Can someone tell me please what do I pay VAT on? I know I probably sound stupid but... I import cosmectics so I have a O% vat from suppliers as it's UK based. I sell the goods on and get paid. Do I charge the VAT on the cost price pulse my mark up?
Is the VAT based on the cost price or the selling price or the difference of the two? Confused! Accountant is basing it on... Retail price..before Reps get their commission and before I do..so my VAT bill is huge. Any help would be gratefully appreciated..
 
Selling price = Purchase price + mark-up + VAT
Mark-up = Shipping and overhead recovery % + Your commission + Reps commission

How can you have a huge VAT bill? Surely you only pay reps commissions and VAT on receipts and NOT on invoices issued, so reps and the tax-man are paid out of positive cash-flow.
 
VAT is based on the selling price.

Also, I think you have to pay the VAT on the imports. This is then netted off the VAT on yours sales but obviously there may be a delay between the payment and the receipts.
 
I think you've hit the nail on the head there! I have sales VAt and import VAt listed but accountant has nothing listed for Import VAT.. eg. Sales Vat shown is 2002.67 import VAt is 1823.72- so how much VAT is due on that invoice? sorry to sound so stupid but my head is melted now!
 
If you pay VAT at the point of entry into the State then you are entitled to reduce your VAT liability by this figure.

So in the example you give above, you would have a VAT liability of €178.95

Do you have documents showing the VAT at point of entry?

You will also be allowed deductions for VAT on other expenses such as mobile phone, diesel (not petrol), accountant's fees etc etc.
 
In your initial post you said that you are not being charged VAT on the comestics you buy from the UK - is this correct?

I'm just wondering how you are showing VAT of €1,823.72 on your purchase if you are saying that you are charged 0% VAT from the UK.

The situation should be that no VAT is charged by your UK suppliers if both yourself and they are VAT registered businesses (which seems to be the case).

You will then charge VAT at 21.5% on the sales price of your goods. e.g. if the total amount you receive from your customer is €100, this is considered to be the VAT inclusive figure and the VAT portion of this €100 is €17.70. The net sale on this is €82.30.

€82.30 x 21.5% = 17.70
€82.30 plus €17.70 = €100

You only charge VAT on your sales however if you are selling to anyone living in Ireland (regardless of whether the customer is VAT registered themselves or not). If you are selling your goods within the EU you must also charge VAT if you are selling to non-VAT registered persons. If you are selling to VAT registered businesses within the EU (but outside of Ireland) you do not have to charge VAT.

Your VAT liability (i.e the amount you must pay to the Revenue) is then the total VAT portion of your sales less any VAT that you have been charged on your expenses. You must have a valid VAT receipt for all expenses in order to be able to claim the deduction.
 
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