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posted 3 years ago
The German Federal Ministry of Finance (Bundesministerium der Finanzen, BMF) has already commented on the VAT consequences of the BREXIT in its letter of December 10, 2020.
In the following we would like to summarize the impact of the BREXIT on businesses with trading partners in the United Kingdom from a VAT perspective.
According to the BMF the United Kingdom will have the status of a third country for VAT purposes from January 1, 2021. This has particular implications for the taxation of trade in goods and services (see under III.). The concluded trade agreement has no effect on VAT. The United Kingdom remains a third country for VAT purposes. However, the agreement includes a number of customs regulations. The customs borders between the UK and the EU remain in place. When goods cross the border, import and export declarations must be submitted and the movement of goods is subject to border controls. However, the agreement provides for an exemption from import duties for goods that have their preferential origin in the other territory. Therefore, goods with preferential origin in the UK can be imported duty-free into the EU and vice versa.
We have collected the information available on our Corona news portal which includes a constantly updated overview regarding the measures to tackle financial impacts of the Corona crisis.
Northern Ireland, on the other hand, has a special status: while Northern Ireland is treated as a third country in trade in services, it continues to be considered part of the EU Community territory in trade in goods. Accordingly, a new VAT identification number (VAT ID) will be created for Northern Irish traders. Accordingly, for entrepreneurs from Northern Ireland, “XI” is to be prefixed as the country code instead of “GB”. In all other respects, the existing regulations for intra-Community trade in goods in Northern Ireland remain in force.
From January 1, 2021, domestic traders will require different proof of the entrepreneurial status of their UK contractual partners. Therefore, if required, confirmation requests for British contractual partners should have been submitted to the Federal Central Tax Office (Bundeszentralamt für Steuern, BZSt) according to Sec. 18e German VAT Act (Umsatzsteuergesetz, UStG) by December 31, 2020.
1. Effects on the movement of goods
2. Effects on trade in services
3. Effects on input tax
In principle, a distinction must be made between remuneration to entrepreneurs from the third country and from the Community territory. In this respect, the BREXIT will have the following consequences:
4. Further points
Furthermore, the BMF letter comments on the following points:
Entrepreneurs with supply or service relationships with the United Kingdom have to follow the amended rules from January 1, 2021 in terms of VAT and customs law.
Entrepreneurs who have previously traded purely within European partners face a major challenge here. Specifically, in addition to adjustments to master data, invoice templates and tax codes, attention must also be paid to the correct and timely application of the input tax refund procedure. The BMF letter provides some practical advices but leaves questions unanswered. If necessary, these will be answered with the already announced further BMF letter, which is to adapt the VAT application decree accordingly.
We would be happy to support you not only in VAT-related questions but in all tax and legal matters. Get in touch with us.
We have collected the information available on our Corona news portal which includes a constantly updated overview regarding the measures to tackle financial impacts of the Corona crisis.
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