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Brexit documents in respect of VAT updated by the European Commission


16 April 2020, the European Commission released an update of the document on the VAT aspects for goods transactions of the withdrawal of the UK from the European Union as part of a set of readiness documents in all kinds of fields. The VAT document addresses in particular the legal situation from 1 January 2021, the relevant parts of the Withdrawal agreement and the rules applicable to Northern Ireland. Other indirect tax related documents address the VAT rules in respect of services, customs procedures and EU excise rules.

In this article we focus on the document relating to goods and provide you with a high-level overview of the content of this document and relevant actions to pursue.

Brexit - updated VAT documents

Changes to the intra-EU trade system

One of the signature VAT changes with respect to Brexit means a complete overhaul of the way trade between the EU and the UK was treated from 1993 and onwards. Instead of intra-Community (or now: intra-EU) tariff free transactions, we will fall back to regular export-import transactions with accompanying import VAT and duties if no agreements are reached in the latter field. Instead of the EU VAT Directive (2006/112/EC), the UK will revert to its own VAT Act. Other highlights include:

  • UK companies (except for Northern Irish) can no longer make use of EU rules such as the Quick Fixes call-off stock simplification and the simplified triangulation.
  • The 2021 rules introduced for e-commerce goods imported from third countries will also apply to goods originating from the UK.
  • Any local EU VAT incurred by UK companies can no longer be recovered through the EU VAT refund portal, but rather through the - mostly paper - 13th Directive requests, provided there is reciprocity (i.e. countries accept UK claims and vice versa).
  • Tax representatives may be required for UK companies to obtain VAT refunds and/or registrations.

Northern Ireland

The Ireland/Northern Ireland protocol (‘IE/NI protocol’) applies from 1 January 2021 is open for evaluation every four years (next by 31 December 2024) and also has an impact on VAT rules. EU VAT rules for goods apply to Northern Ireland even though it is part of the UK.

Supplies of goods between EU Member States and Northern Ireland will continue to qualify as intra-EU transactions, but for services Northern Ireland will be regarded as a third country. Furthermore, supplies of goods between Northern Ireland and the rest of the UK will qualify as export/import transactions.

Businesses established in Northern Ireland will continue to have access to EU regulations such as the One Stop Shop mechanism to be introduced in 2021, the EU VAT refund portal (inasfar input VAT relates to supplies of goods) and the rules for new means of transport. A consequence is furthermore that the compliance requirements for EU businesses, e.g. filing EC Sales Listings and Intrastat declarations, will continue to apply for Northern Irish businesses and that presumably VAT identification numbers commencing with the ISO country code “NI” will be created to report intra-EU supplies to Northern Irish businesses.

brexit - practical considerations

Practical considerations

The above rules will have a profound impact on the goods trade between the EU and the UK and within the UK with Northern Ireland. Although tackling the fall-out from COVID-19 is of course priority for most - if not all - companies, 1 January 2021 is not going away, which is why it makes sense for businesses to prepare for the above changes already now. In our view the two main actions are to evaluate the impact of these changes on your supply chains (to the extent not already done) and to timely prepare the changes to ERP system settings and invoice lay-out in order to test these before the projected 1 January 2021 implementation date. In particular where your company has trading activities to/from Northern Ireland and this country is not set-up separately from the UK in your ERP and other systems, changes will be required. We are here to support you in these challenging times.

Source: European Commission 16 April 2020

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Jan-Willem Thoen

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Bart van Osch

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