Taxes
25 September 2019

Consequences of a “no-deal” Brexit from the customs, VAT and excise duty point of view

Unless the United Kingdom ratifies the Withdrawal Agreement or requests further extension of EU membership to which the European Council agrees by unanimity, the United Kingdom will leave the EU without a deal on 31 October 2019. In this scenario, the United Kingdom will become a third country as of 1 November 2019 without any transitional arrangements.

Elvíra Ungerová

Consequences of a “no-deal” Brexit from the customs, VAT and excise duty point of view are mainly as follows:

Customs

  • Goods which are brought into the customs territory of the EU from the United Kingdom or are to be taken out of that territory for transport to the United Kingdom, will be subject to customs supervision and may be subject to customs controls. This implies inter alia that:
    • obligation to lodge customs declarations will arise and other customs formalities apply,
    • customs authorities may require guarantees for potential or existing customs debts,
    • businesses trading with the UK must apply for an EU EORI number.
  • Customs duties will apply to goods entering the EU from the United Kingdom.

  • Prohibitions or restrictions may also apply to some goods entering the EU from the United Kingdom, which means that import or export licences might be required.

  • The following will no longer be valid in the EU („EU 27“):

    • EORI numbers granted in the United Kingdom,

    • Import and export licences issued by the United Kingdom,

    • Authorisations granting the status of Authorised Economic Operator (AEO) and other authorisations for customs simplifications, issued by the customs authorities of the United Kingdom,

    • Authorisations for customs simplifications or procedures, such as customs warehousing, issued by the United Kingdom.

  • Goods originating in the United Kingdom that are incorporated in goods exported from the EU to third countries will no longer qualify as "EU content" for the purpose of the EU's Common Commercial Policy. This affects the ability of EU exporters to cumulate with goods originating in the United Kingdom and may affect the applicability of preferential tariffs agreed by the EU with third countries.

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VAT and excise duties

  • Goods which enter the VAT territory of the EU from the United Kingdom or are dispatched or transported from the VAT territory of the EU to the United Kingdom will respectively be treated as importation or exportation of goods, i.e.:
    • VAT will be charged at importation
    • exports are exempt from VAT

This change will also impact distant selling from or to the UK.

  • Transport of goods between the EU member states and the UK will no longer trigger the obligation to complete intrastat reports and EU Sales Lists.

  • Businesses established outside the EU, who supply telecommunications services, broadcasting services or electronic services to non-taxable persons in the EU, wishing to use so-called Mini One-Stop Shop (MOSS) special scheme, will have to be registered for the MOSS in a Member State of the EU.

  • Taxable persons established in the United Kingdom purchasing goods and services or importing goods subject to VAT in a Member State of the EU who wish to claim a refund of that VAT may no longer file the application electronically in accordance with Council Directive 2008/9/EC.

  • Accordingly, businesses established in the EU purchasing goods and services or importing goods subject to VAT in the UK who wish to claim a refund of that VAT may no longer file the application electronically in accordance with Council Directive 2008/9/EC.

  • Triangular trade simplification that includes a business registered for VAT in the UK will no longer apply.

  • A company established in the United Kingdom carrying out taxable transactions in a Member State of the EU may be required by that Member State to designate a tax representative as the person liable for payment of the VAT in accordance with the VAT Directive. A representative for delivery of documents from the tax authorities may be required in the EU.

  • The movement of goods which enter the excise territory of the EU from the United Kingdom or are dispatched or transported from the excise territory of the EU to the United Kingdom will respectively be treated as importation or exportation of excise goods. This implies, inter alia, that:

    • the EMCS on its own will no longer be applicable to excise duty suspended movements of excise goods from the EU into the United Kingdom, but those movements will be treated as exports, where

    • excise supervision ends at the place of exit from the EU.

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Movements of excise goods to the United Kingdom will therefore require an export declaration as well as an electronic administrative document (e-AD). Movements of excise goods from the United Kingdom to the EU will have to be released from customs formalities before a movement under EMCS can begin.

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