On 30 January 2018, the EU Commission issued a notice regarding the impact of Brexit in the field of customs and indirect taxation.
In its notice, the EU Commission calls for preparedness from EU stakeholders, and recalls that, unless an agreement would provide for another date, the United Kingdom will have to be treated as a non-EU country as from 30 March 2019.
Customs
From a customs perspective, the Brexit entails that the United Kingdom would no longer belong to the EU customs territory. This, in turn, triggers the application of customs supervision – and potential controls – in accordance with the Union Customs Code, as well as the obligation to comply with customs formalities (such as customs declarations). Customs authorities would also be entitled to require guarantees for potential or existing customs debts, and goods imported from the United Kingdom will trigger the application of the relevant customs duties.
Goods imported from – or exported to – the United Kingdom may also be subject to specific prohibitions or restrictions. This notably covers dual use and military goods, but also specific waste, chemicals and endangered species (see here for more information). In addition, goods originated in the United Kingdom and incorporated in goods exported from the EU to third countries will no longer qualify as “EU content”, therefore jeopardizing the applicability of preferential tariffs negotiated between the EU and its commercial partners.
Finally, Authorized Economic Operators (AEO) status delivered by the United Kingdom’s customs would no longer be valid.
VAT and excise duties
From a VAT perspective, goods entering the EU VAT territory from the United Kingdom would trigger the application of VAT upon import, while goods leaving the EU would be treated as export – and therefore VAT exempt. The same is true for the application of excise duties.
Taxable persons established in the United Kingdom wishing to benefit from the MOSS mechanism – applicable to the supplies of electronic services to consumers in the EU – would be required to register in a Member State of the EU. In addition, UK taxable persons carrying out taxable transactions in the EU may be required to register for VAT in the relevant Member State, or to designate a tax representative liable for the payment of VAT.
Finally, input VAT incurred in the EU by UK taxable persons would no longer be recoverable through Directive 2008/9/EC, but through Directive 86/560/EEC, which provides a refund mechanism for taxable persons established in non-EU countries.
This notice – which follows an earlier document regarding the impact of Brexit on controlled goods – constitutes a call for preparedness on EU stakeholders, including taxable persons established in the United Kingdom. Irrespective of the future of the current negotiations, EU businesses should plan ahead to mitigate the impact of the Brexit.
