Calculating VAT with Numbero - Easier Than Ever Before
Calculating VAT with Numbero - Easier Than Ever Before
Have you ever paused at the VAT section while creating an invoice, trying to figure out what's required? While calculating VAT isn't exactly rocket science, when developing the Numbero app, we wanted to make the process as straightforward as possible. In this overview, we'll explore what VAT is and how the Numbero app allows you to perform accurate VAT calculations in mere seconds.
What is VAT?
VAT, or Value Added Tax, is a consumption tax paid by the end consumer—the person who purchases or receives the goods. If you're a supplier of goods or services and you issue an invoice for these goods or services, then in this case, the recipient of the invoice is responsible for paying the VAT. We encounter VAT daily, every time we make a purchase. In these instances, we are the recipients of the goods or services.
The VAT system stipulates that businesses (in this case, you) collect the tax from the end consumer when supplying goods or services, which is then remitted to the state budget. Why "value added"? Because VAT is applied to the difference, or the value added, created during the production and distribution stages.
The application of VAT to goods and services is harmonized across the European Union, based on the 2006 European Union Council Directive. So, regardless of whether you use Numbero for domestic transactions or when collaborating with international partners, VAT calculation will be present in all cases.
What is the VAT Rate?
This is where things get a bit more complex, as the VAT rate can vary depending on the type of goods or services. While VAT rates differ across European Union countries, the standard VAT rate, which cannot be lower than 15%, applies to the vast majority of goods and services, regardless of the country.
Several special VAT rates also exist, as well as a reduced VAT rate, which is generally never lower than 5%. It's worth noting that the reduced rate is most often not applicable to electronically supplied services. Special VAT rates include categories such as super-reduced rates, temporary rates, and zero rates. However, these rate types only come into effect under specific conditions, and the likelihood of encountering them in practice is quite low.
But what VAT rate will you most likely encounter when creating invoices?
In practice, the 21% rate, which is also the standard VAT rate in Latvia, appears most frequently in transactions between businesses and individuals. In rarer cases, you might need to work with a 12% VAT rate. If you conduct international transactions and manage a company registered abroad, a different standard rate will likely apply. In such cases, we recommend researching the VAT rate regulations in the respective country.
For more information regarding VAT rate application rules in Latvia, we encourage you to visit the website of the Latvian Ministry of Finance, which clearly lists the various types of goods and services and their applicable percentage rates.
Calculating VAT with Numbero
So how exactly does Numbero make VAT calculation easier than ever before? Quite simply - by doing the work for you. All you need to know is the applicable VAT rate for the good or service.
The Numbero VAT calculator works as follows: In the final stage of invoice creation, the user adds the product type, unit of measure, quantity, and price. Right next to this, the applicable VAT rate is added. Based on this, Numbero automatically performs the calculation, providing three key figures:
Amount excluding VAT
VAT itself
The exact final amount including VAT
It's worth noting that you can list goods and services with different VAT rates within a single invoice. A VAT reference will appear if any of the goods or services are subject to a 0% VAT rate. The variation in rates will not affect Numbero's ability to calculate the precise final sum.
At the same time, the invoice recipient can be confident in the accuracy of the result, as the calculation of the total sum will be displayed in a clear and transparent format.
If you're looking for a platform that allows you to create invoices using automated solutions, without having to worry about various calculations and percentage rates, we invite you to try Numbero - a platform centered around the user and their needs.