UK leaving the EU: Direct and indirect tax implications

We know that preparation is the main key to succeeding and seriously improves from any negative impact of the economic environment, but what do we do when we do not know exactly what to prepare for? Brexit triggers an uncertainty on how and what to plan for.

Our VAT experts are here to help your business continue to trade confidently cross-border. We have prioritized the analysis of the impact of Brexit on the businesses of our current and possible clients, so that you can watch in the coming next a short presentation of the conclusions learned from our research.

Deal / No – Deal implications

• Under a no-deal Brexit, there would be no time to bring in a UK-EU trade deal
• Trade would initially have to be on terms set by the World Trade Organization (WTO), an agency with 162 member countries
• If this happens, a type of tax known as a tariff-ill apply to most goods UK businesses send to the EU. Many companies worry that could make their goods less competitive
• No deal would also mean the UK service industry would lose its guaranteed access to the EU single market
• That would affect everyone from bankers and lawyers to musicians and chefs
• Most economists and business groups believe no deal would lead to economic harm
• Businesses have been encouraged to prepare by stockpiling in case supplies are disrupted.

Supply chain fiscal implications

If you are involved in EU triangular trade that includes the UK, then it is likely you will have additional VAT registration and reporting obligations.

The EU simplification for triangular trade operates where three separate EU countries are involved in the supply of goods. It typically involves an intermediate supplier purchasing goods from one country and drop shipping them to its customer in a different country (supplier, intermediate reseller and customer are all in different EU countries). The simplification effectively means that only the final customer accounts for VAT. Once the UK is outside of the EU it will not be able to take advantage of the simplification rule, which could result in one of the parties involved in these triangular arrangements, most likely the intermediate reseller, needing to register for VAT in another country.

In regard with goods movement, the main changes are the following:

1. The UK VAT registration number will no longer be available for triangulation simplification
2. UK businesses will most likely need to register for VAT purposes
3. Transactions cross-border will be treated as imports and might be liable to customs duty
4. Goods will become imports and exports, thus the concept of dispatches and acquisitions removed from the UK/EU trade
5. The exemption for exports will work as long as conditions met so similar to dispatches
6. For the moment, the supply of goods are unaffected by Brexit.

Supply chain fiscal implications 

Services treatment

• UK is very likely to continue to apply VAT in line with VAT Directive
• Exception for TBES – Telecommunications, Broadcasting and Electronically Supplied services
• Need to consider liability to be registered in EU and in UK on an ongoing basis
• Unlikely to be significant changes to treatment of services

PRACTICAL STEPS TO TAKE NOW

• Identify if any transactions currently make use of the triangular simplification and what VAT registration requirements might be needed
• Consider alternate supply arrangements to avoid VAT registration requirements

OSS VAT implications

• E-commerce Directive and One Stop Shop (OSS) is potential for further delay until 2022, after being postponed to 1 July 2021
• B2C goods from UK-EU will be export from UK and import into EU

VAT registrations

Many businesses are making the strategic decision to relocate inventory, or stockpile product, in both the UK and other EU countries. Wherever inventory is being held will likely require a standalone VAT registration.

Practical steps to consider

• Assess the most advantageous location to hold inventory
• Consider the need for VAT registrations wherever inventory is held

Fiscal Representation

Trade with confidence with our EU VAT fiscal representation service:

• Determine VAT obligations in your cross-border supply chains
• Set up local fiscal representation where required
• Apply for additional VAT registrations
• File all ongoing VAT declarations
• Manage the process of VAT de-registrations
• Some Member States require non-EU businesses to appoint a Fiscal Representative where the business requires a non-resident VAT registration
• The due diligence and acceptance process is thorough – i.e. supporting information on the company, shareholders etc. will need to be provided
• Some countries require to put a financial guarantee in place, whether to a Fiscal Representant or directly to the Tax Authorities; the amount is based on the risk level and is calculated as a percentage (i.e. 20%)
• A transfer to a Fiscal Representation should normally take a couple of weeks, but we expect this process to take longer as the local authorities will receive a large number of requests; thus, planning is the best idea

Fiscal Representation

Who can be in the position of a Fiscal Representative?

The Fiscal Representative has to be a locally established business and to be authorized by the Tax Authority. According to each legislation in force from each State Member, the requirements for acting as a Fiscal Representative may differ and so will the risks for both parties in this regard.

Is there a possibility to be prepared before the transition period is over?

We will certainly answer Yes – we can assist with any of the mentioned matters  through our strong network of partners with:

• Les enregistrements à la TVA dans tous les 28 États membres de l'UE
• Les enregistrements à la TVA dans les pays non-membres de l'UE
• Tax Representation offre des services de représentation fiscale à travers l'Europe et non seulement, afin que votre entreprise soit conforme aux obligations locales en matière de la TVA.

Nos services de représentation fiscale comprennent :

• Assurer le respect des lois fiscales locales aux fins de la TVA
• Assurer que votre entreprise est conforme aux règles locales en matière de facturation, de traitement de la TVA, de procédures comptables et de soumission des déclarations sur la TVA et de paiements
• Gestion des demandes de renseignements et des inspections fiscales auprès du bureau local de la TVA