Brexit will considerably affect all European companies that do business with British entities, regardless of the business sector. In particular, the areas of customs duties and VAT will see significant changes. What obligations will be associated with the import and export of goods? Is there a need to revise existing contracts with business partners? And what impact will it have on the application of various VAT regimes such as call-off stock or triangulation? Experts from Deloitte’s tax and legal function addressed these and other issues in the topical webcast.

The UK left the EU at the end of January 2020, with the legal relationship between the two entities being in a so-called transitional period until 31 December. During this time, their task has been to prepare for all the changes that this withdrawal brings. At the beginning of 2021, the UK will be granted the status of a third country from the EU’s point of view, with all the related consequences.

4 tips to prepare for the tax implications of Brexit

1. Analyse your situation and relationships with British companies
2. Prepare your systems in time for upcoming changes
3. Communicate with your business partners and set the delivery terms correctly
4. Evaluate the need to register for VAT

At present, the UK is still participating in the EU’s common market and customs union. Negotiations are still ongoing on the conclusion of a partnership agreement based on the principle of a free trade agreement, which would, inter alia, ensure the possibility of applying preferential (reduced) customs tariffs. However, if no agreement is concluded, reciprocal trade will be governed by the WTO rules, which in practice means, for example, the application of contractual tariffs (which the EU currently applies e.g. with respect to the USA or Russia).

What to prepare for in terms of customs

• Customs procedures in the EU. All goods imported or exported from/to the UK will be subject to the standard customs procedure. In the case of imports, account should be taken of a potential assessment of a customs debt. At the same time, companies must meet other conditions, such as having EORI, valid licenses or permits, etc.
• Customs procedure in the United Kingdom. Until the end of June 2021, the import procedure may take place in a simplified form by postponing the filing of customs declaration and assessment of the customs debt by up to 6 months. For exported goods, the possibility of postponement of obligations does not apply.
• Checks of goods at the border. These will mainly concern selected goods, such as commodities subject to veterinary or phytosanitary inspections.
• British entities in the EU. The import and export of goods will only be possible through an indirect representative, while it will be necessary to identify the EU-based exporter. In addition, there will be a need to obtain an EORI number in the EU or obtain related licenses in the EU. It will also be necessary to assess the need to register for VAT.
• Customs authorisations and decisions. Some authorisations will have to be corrected, or revoked and replaced by new authorisations. In certain cases, it is not possible to grant authorisation to a person not based in the EU.

The changes in the VAT area will mainly concern changes in the reporting of movements of goods between the UK and the EU – intra-Community supply and acquisition will become standard exports or imports. They will not have to be reported in Intrastat or EC Sales List. The relocation of goods will also see changes, e.g. the call-off stock regime will not be possible anymore next year. Similarly, chain transactions using the simplification for triangulations in which goods will be delivered to or from the UK will no longer be performed. In the case of provision of services to British customers registered for VAT in the Czech Republic, it will be necessary to take into account the rule of actual consumption, which applies to customers not based in the EU. All of this is just an illustrative example of the different impacts in the area of VAT.

Does your organisation do business with a British company? Do you want to know what specific changes await you and how to prepare for them? We have summarised more up-to-date information on the UK’s withdrawal from the EU in this article. If you have any questions, you can also contact us directly.