Consequences of the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the EU

After several postponements, the United Kingdom (as of today) is no longer a member of the European Union since 30.01.2020. As a consequence of the brexite, the United Kingdom is legally considered as a third country at the end of the transitional period on 31.12.2020. With the beginning of the new year, all rules for harmonizing divergent legal systems will no longer apply. Sales tax and customs law are particularly affected by this.

As a result, companies are now faced with the challenge of adapting administratively to the new situation. What exactly has to be taken into account and what changes are to come, you can read in summary below:

1. trade of goods

Changes exist above all in the area of trade in goods. At the end of the transitional period, cross-border trade in goods will no longer be considered an intra-Community supply, but an export supply. This means, firstly, that purchases of goods from the United Kingdom may be subject to customs clearance and related import VAT. This is deductible from input tax under the statutory conditions. On the contrary, goods entering the United Kingdom will also be subject to import duties unless there is an agreement between the two countries on customs matters by the end of the transitional period.

2. further services

Brexit also has an impact on the tax treatment of services outside the trade in goods. For example, other services provided by an entrepreneur from the United Kingdom in Germany will no longer be included in the so-called “recapitulative statement” in future, just as in the reverse case. Similarly, no (EU) VAT identification number will be provided in the future for proof of entrepreneurial status.

3. Other VAT aspects

The list of tax law changes is long and can in no way be conclusively dealt with here. The effects of brexit can include the inapplicability of the MOSS (Mini-One-Stop-Shop) procedure for electronic services, changes in the input tax refund procedure or in the confirmation requests according to §18e UStG.

Therefore, you will probably have to use different control keys and accounts within the company. Care should also be taken with invoice texts. These must then also be given if changed.

In summary, there will be an enormous increase in administrative burden and legal uncertainty in the tax field. In order to avoid financial disadvantages, all legal questions should be clarified in good time before the end of the transitional period.

Our team of competent lawyers and tax advisors will be pleased to advise you comprehensively on all necessary internal corporate changes.

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