Are we going back in time on January 1st 2021? Will there be a physical border again between the United Kingdom (UK) and the EU member states? In case of a no deal Brexit, this appears to be the case. Without a Brexit deal between the UK and the EU, custom formalities will apply again on the supply of goods from the UK. Import VAT will be charged if goods are shipped from the UK and imported into the Netherlands.
The UK left the European Union (EU) on January 31, 2020. From February 1, 2020, a transition period started which will last until December 31, 2020. During this period the EU and the UK are negotiating a new cooperation agreement.
Nevertheless, (Dutch) companies are advised to prepare for a ‘no deal’ Brexit, a Brexit without further agreements, which again will create physical borders. From a VAT perspective this means that a delivery of goods to the UK from an EU county no longer qualifies as an intra-community supply, but as export supply of goods. In the Netherlands both intra-community supplies and export supplies are subject zero rated. However, they are required to be reported in different sections of the Dutch VAT return. Goods purchased by a Dutch company from the UK will first have to be imported through Customs into the Netherlands before they can be delivered to the Dutch company.
In any case, Brexit means that EU companies doing business in the UK have to prepare from VAT and Customs perspective for the upcoming changes.
Import & Export
Adjusting tax codes in the ERP system
A sale of goods by a Dutch company to a company in the UK (B2B) currently qualifies as an intra-community supply which has to be reported in section 3b of the Dutch VAT return. After Brexit, the UK will qualify - like Switzerland and Norway – as a third country, meaning that from this moment a supply of goods to a company in the UK will qualify as an export supply which has to be reported in section 3a of the Dutch VAT return. Adjust the "tax" codes in your ERP or accounting system, so that the supplies to the UK end up in the correct section of your Dutch VAT return.
Intrastat and EC Sales Listings
From January 1, 2021, sales by a Dutch company to the UK no longer need to be included in the Intrastat and EC sales listings. Instead, an export declaration should be filed at the Dutch Custom authorities.
Article 23 license
Many Dutch companies that purchase goods from the UK have received a letter from the Dutch tax authorities in which they are informed about the possibility to apply for an ‘article 23’ license. With an ‘article 23’ license import VAT does not have to be paid to Customs at the moment of importation, instead the import VAT can be reported in the VAT return. Not having to pay import VAT to the Custom authorities provides a cash flow advantage, because the import VAT due can be reclaimed in the same VAT return.
Dutch companies need an EORI number to be able to import goods from outside the EU. We recommend Dutch companies to check whether they already have an EORI number. If you do not have one yet, apply for an EORI-number as soon as possible at the Dutch Customs authorities (www.douane.nl).
Simplified regulations no longer apply
Refund requests from UK VAT
We advise Dutch companies to reclaim UK VAT paid in 2020 before January 1, 2021 via the portal of the Dutch Tax Authorities. This prevents that the VAT must be reclaimed directly from the UK tax authorities, possibly via a UK tax representative.
In case of a no deal Brexit, applying the simplified triangulation rules will no longer be possible, resulting in a potential VAT registration in another EU member state or the UK.
Simplification for consignments and call-off stock
The simplification for consignments and call-off stock will no longer be applicable. This occurs when a supplier holds stock in the UK in a warehouse of the consignee or the buyer. At this moment the Dutch seller usually does not have to register for VAT in the UK. However, after Brexit Dutch companies possibly have to register for VAT in the UK if they have consignment or call-off stock in the UK.
Sales to private individuals
Distance sales scheme will no longer be applicable
The distance sales scheme for goods that are supplied from the Netherlands to private individuals in the UK will no longer be applicable. Instead, these sales will be considered an export sale of goods. At the end of the transition period, we understand that the British government will introduce an online portal for the VAT treatment of consignments not exceeding GBP 135 in value that are shipped from the EU to the UK. If the goods have a value of GBP 135 or more, VAT will be charged from the recipients in the UK.
Digital services to private individuals in the UK are subject to UK VAT. After the transition period the One Stop Shop (OSS) scheme for the UK will not be applicable anymore, which implies that the VAT can no longer be declared to the Dutch tax authorities via the OSS system. Instead, a UK VAT registration number must be requested for reporting and filling UK VAT returns.
Adjusting tax codes in the ERP system
The supply of services by a Dutch company to UK company are subject to VAT in the UK under the current (B2B) rules. The VAT due is reverse charged to the UK company which means that the UK company reports the VAT due. The Dutch company issues an invoice without VAT and states ‘Services Reverse Charged’. The supply of services must be reported in section 3b of the VAT return. After Brexit, the supply of service is still taxed in the UK. Depending on the VAT legislation in the UK, the customer must declare VAT under the reverse charge mechanism. Most important, the Dutch service provider no longer reports the supply of service in its Dutch VAT return and the EC Sales Listing.
Adjust the 'tax' codes in your ERP or accounting system, so that from 2021 services to customers in the UK will no longer be reported in the NL VAT return and the EC Sales Listing.
UK VAT right of deduction on costs related to exempt services to customers in the UK
After Brexit, the VAT on costs paid by a Dutch company in relation to financial services performed to UK customers will be deductible. This right of deduction of input VAT does currently not exist.
Brexit Impact Vouchers
The Dutch government provides Brexit vouchers which offers SME entrepreneurs a subsidy for advice about the consequences of Brexit for their company. These vouchers offer a discount of up to 50% of the costs for the advice of an external expert and with a maximum of € 2,500, excluding VAT: https://mijn.rvo.nl/brexitvouchers.
Brexit Tax Impact Scan & Taxperience VAT team
The Taxperience VAT team is happy to help out with a special Brexit Tax scan to clarify the indirect tax consequences of Brexit for your company in the field of VAT and customs duties.
For questions, please contact our indirect tax team:
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