Expiry of the Brexit transition period on 31.12.2020

March 10, 2021

The withdrawal agreement with the United Kingdom provided for a transitional period during which Union law would continue to apply to and in relation to the United Kingdom. This transition period now expired on 31.12.2020. The trade agreement now on the table does not change this either, so that the following consequences are likely to arise for VAT:

  • The United Kingdom will be considered a third country for VAT purposes from 1.1.2021.
  • This means that deliveries to companies in the UK are no longer to be treated as intra-Community deliveries, but as export deliveries. Materially, this does not make any difference, but in the future, the proof requirements for export deliveries must be observed. Appropriate precautions must be taken in the accounting system to ensure that the invoicing is changed and the deliveries are correctly reported in the advance VAT returns. In this respect, the master data of the recipients in the accounting system must be adjusted. In future, these deliveries will no longer be shown in the recapitulative statements. Since the VAT identification numbers issued to British companies will no longer be valid, domestic entrepreneurs will need other proof of the entrepreneurial status of their British business partners.
  • For goods deliveries between companies and private individuals/non-businesses, the regulations for export deliveries must generally be observed, and no longer the regulations for mail order deliveries.
  • If goods are purchased from the UK by domestic companies, these will no longer be considered intra-Community purchases in the future, but will be subject to import VAT.
  • If German entrepreneurs receive other services from British entrepreneurs, the basic principle of the place of receipt and thus the reverse charge procedure will apply.
  • How the reverse case, i.e. other services provided by German companies to British companies, will be treated in the future depends on future British law. It is expected that the reverse charge procedure will also be applicable in this case.
  • It is still unclear which registration obligations German companies will have to comply with in the United Kingdom when making deliveries of work and services, intra-Community triangular transactions and mail order business.
  • The withdrawal agreement stipulates that the EU regulations for input tax refund applications from and to the UK will continue to apply until December 31, 2020, and that applications relating to refund periods in 2020 can be submitted until March 31, 2021. Which provisions will apply in the future is currently still open.
  • Northern Ireland will be granted a special status alongside Great Britain, according to which Northern Ireland will continue to be regarded as a Community territory for the import and export of goods. This means, in particular, that no import duties will be levied and no quantity restrictions will apply to the import and export of goods, and the tax treatment will remain unchanged. For other supplies, both Great Britain and Northern Ireland are considered third countries.

Note: Customs obligations are governed by the trade agreement now in place.