How to Take My VAT on My Gross Sales for My Pub
Many European Union countries use a value-added tax (VAT) to generate significant revenue for governments. VAT is analogous to the sales tax used in the United States and has been adopted, to date, by more than 130 countries.
Both VAT and sales taxes are types of consumption taxes. In the VAT system, a business pays an input VAT when it purchases inventory and charges an output VAT when it sell goods. The business has an obligation to remit to the tax authorities the output VAT it collects subject to deductions for input VAT paid to suppliers. Investopedia illustrates it this way: "For example, when a television is built by a company in Europe the manufacturer is charged a value-added tax on all of the supplies they purchase for producing the television. Once the television reaches the shelf, the consumer who purchases it must pay the value-added tax that applies to him or her."
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Instructions
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Register for the VAT. If you don't register for the VAT, deductions that you are otherwise entitled to may be denied, and you may incur fines.
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Determine the net cost of a serving. For example, for a keg of beer, divide the price of the keg by the average number of servings per keg.
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Determine the input VAT for each serving. Divide the input VAT of the keg by the average number of servings per keg. If the input VAT for the keg is $10, and there are 50 servings in a keg, then the input VAT per serving is 20 cents.
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Determine the output VAT for each serving. If sales are taxable at 20 percent, a $5 pint will have a VAT of $1.
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Add the output VAT to the net sales price of servings, and collect it from your customers.
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Subtract the input VAT from the output VAT to arrive at the VAT your establishment has to remit to the tax authority. In the example, 80 cents is remitted to the tax authorities for each pint served.
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Investigate whether your business will benefit from any of the retail schemes that simplify VAT calculations.
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References
- Photo Credit a pub in london image by Kristina Ubaviciute from Fotolia.com
