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VAT after Brexit

On 24 December 2020, a new economic and social partnership was reached between the UK and EU which provides among other things zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin.

 

Even though this agreement was reached, what was foreseen after this period from a VAT perspective after Brexit has not changed much. All free movement of goods, people, and services will eventually come to an end and intracommunity rules for supplies of goods and services no longer apply as B2C sales are not a part of EU’s rules for distance sales.

 

 

VAT on digital services

Digital Services – After Jan 1st 2021 the possibility of UK digital services companies to account for VAT in the EU via the UK Mini One-Stop-Shop (otherwise know as MOSS) is no longer an option.

UK Sellers will either need to register for a VAT number in each EU country where they have customers or consider whether they can apply for the Non-Union MOSS scheme by registering for VAT in the EU. All non-EU businesses who used a UK MOSS registration in order to account for VAT  in the EU, will have to register again for MOSS in the EU and also create a separate registration in the UK under a regular VAT return.

EU Sellers will need to register for VAT in the UK in order to account for UK VAT on sales of digital services to UK based consumers, as the EU MOSS is no longer an option in their case.

VAT after Brexit

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Brexit VAT Changes

Sellers have many factors to take under consideration as they need to pay attention to a plethora of new rules as UK VAT treatment will depend on the consignments’ value (GBP 135 or less), the customer’s VAT status (if the customer is a UK VAT registered business or a consumer), the location of the goods at the moment of supply (if they are inside or outside GB) and the involvement of an online marketplace (OMP).  GVC can help you with all of your VAT obligations in the UK and EU.

brexit

 

brexit eu uk vat

Use And Enjoyment Rules

The UK is now a 3rd country from an EU perspective. This means that UK businesses selling their products to customers in the EU will need to assess whether there are “Use and Enjoyment rules” in each Member State that apply to their activities and may require the UK supplier to VAT register and account for local VAT in the EU.

A difficulty arises here since obligations need to be checked on a country by country basis as each EU Member State can set its own rules as to what services are subject to Use and Enjoyment.

Reclaiming VAT On the supply of Financial Services after Brexit

 

UK  businesses providing specific financial services will benefit after Brexit from increased VAT recovery under an extension of the “specified supplies” rules. Previously, these rules only applied when a UK business provided certain services to non-EU customers. The “specified supplies” provisions have been extended to include sales to non-UK customers and now also apply to the EU.

 

EU VAT Recovery : There are changes to how UK organizations reclaim EU VAT in countries where they are not required to be VAT registered. Previously, such claims were made under a common EU VAT reclaim process. Moving forward, post Brexit VAT reclaims are still possible, but they will need to be made directly to the local overseas tax authority. At the same time, there may be changes to the time frames of when claims can be made and procedural requirements might be subject to changes.

 

Fiscal representation for UK based businesses after Brexit

Even though the transition period for BREXIT has passed all EU States are still adjusting to the new rules in relation to VAT and fiscal representation for UK businesses.  This is an ongoing process for many territories. GVC will keep you updated regarding the countries in which a fiscal representative is needed.

Fiscal representation

At the moment UK Businesses will require a fiscal representative in the following countries:

 

Austria Bulgaria
Cyprus Denmark
Estonia Greece
Hungary Poland
Portugal Romania
Slovenia

This information is liable to change very soon, please contact us in order to help you with your fiscal representation.

 

In the below-listed countries fiscal representation is NOT a requirement for UK-based clients, although there might be other limitations, please check-in comment.  

 

EU country Comments
Finland Not needed due to the EU-UK Mutual Assistance Protocol  
France Not needed due to the EU-UK Mutual Assistance Protocol 
Italy Not needed due to the EU-UK Mutual Assistance Protocol 
Lithuania Not needed due to the EU-UK Mutual Assistance Protocol 
Sweden Not needed due to the EU-UK Mutual Assistance Protocol 
Luxembourg Tax office cash deposit may be required 
Netherlands Except for import VAT licenses 
Malta Some exceptions are in place
Germany VAT agent required 
Czech Republic
Ireland
Latvia
Slovakia
Belgium
Croatia
Spain

 

Conclusion

Even though the deal means there is no hard Brexit, from a VAT perspective the Brexit could not be any harder.  It is important to be aware of the new rules that will apply. Also, it is important to note that the EU rules for online B2C trade will change significantly mid-2021. The end of the Brexit withdrawal period has resulted in many UK VAT rule changes, and organizations will need to adapt to new VAT accounting arrangements. It’s recommended  that organizations review their sales and purchase transactions and administrative processes to ensure that any changes to the VAT rules have been identified. This will help guard against unexpected costs.

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