Brexit’s impact on taxation
The United Kingdom withdrew from the EU at the end of January 2020. The transition period for leaving the EU started in February and goes on for the remainder of 2020.
This means that the current rules will continue to be in place in 2020, as if the UK were still a member of the EU. The European Union and the United Kingdom will have talks during 2020 on the issue of their future relations. Due to the negotiation schedule, some sectors may fall outside the scope of the agreement starting 1 January 2021. Businesses in particular should be prepared for this possibility.
For more information on the withdrawal agreement, the transition, and on the new agreement to be negotiated, see the website of the Finnish Prime Minister’s Office.
Withdrawal agreement and transition period
The agreement on the UK’s withdrawal entered into force 1 February 2020. The agreement will dismantle all cooperation based on the former membership of the United Kingdom in the EU in an orderly manner. However, the agreement does not contain any provisions regarding the UK’s future relations with the EU.
The agreement sets out a period until the end of 2020 known as the transition period when the relations between the EU and the UK will continue under the EU’s current rules, as if the UK were still a member country. The only significant exception is that the UK no longer participates in EU decision-making or in the activities of EU bodies.
Impact on citizens
The provisions of the Withdrawal Agreement safeguard the residence, employment and social security rights of EU citizens living in the UK, and UK citizens who live in the EU, under EU law for life if they have settled in the UK or the EU before 1 January 2021. Their status and rights remain as they are, under the key EU legislation, as of 31 December 2020. People who move between the UK and EU countries after 31 December 2020 are no longer subject to the EU freedom of free movement of citizens, and restrictions will be placed on their entry and rights.
Brexit has no direct impact during the transition period on individual taxpayers’ income taxes. As for goods, the transition ensures that their free movement between the UK and EU still continues in 2020.
Impact on businesses
The UK turns into a non-EU country, but the free movement of goods between the UK and EU will continue throughout the transition period. During the transition, the current EU rules and guidelines relating to VAT in the internal market and excise duties continue to be applied.
An important part of the Withdrawal Agreement is the Protocol on Ireland and Northern Ireland. Under the Protocol, starting 1 January 2021, Northern Ireland will be a territory where the VAT and excise duty rules (regarding goods trade) of the European Union continue to be applied. In other words, the transactions with goods between EU countries and Northern Ireland will be taxed as intra-Community supply and intra-Community acquisition.
As for excise duties, a duty suspension arrangement will be in effect, making Northern Ireland an exemptible territory for a temporary period. This means that movements of goods will take place on a temporary basis between Northern Ireland and the EU in the framework of the EMCS system.
However, supply and acquisition of services with Northern Ireland are taxed as if Northern Ireland were a non-EU country from the VAT perspective. Trading with services is not included in the Protocol on Ireland and Northern Ireland.
The Protocol continues to be in effect up to 31 December 2024. After that, the Protocol will no longer be applied unless the House of Representatives (Northern Ireland) approves of it.
The UK withdrawal from the EU has no direct impact on corporate taxpayers’ income taxes.
Further information about the withdrawal (the Finnish Prime Minister’s Office)
After the transition period, as of 1 January 2021, all goods moving between the UK and the EU must be cleared at Customs. After 1 January 2021, any goods brought by a company from the UK to Finland are regarded as imports.
The tax treatment of such imports depends on whether the importer has a VAT registration in Finland:
- If you are the importer and you have a Finnish VAT registration: file and pay the VAT-on-imports to the Tax Administration as a self-assessed tax; file the Customs Declaration to the Finnish Customs
- If the importer is not VAT registered: The Finnish Customs will charge VAT on imports on the value of the goods that were imported.
On or after 1 January 2021, companies that sell goods from Finland to purchasers in the UK will be treated as exporters, and the sales transactions are regarded as VAT-exempt exportation. In other words, the transactions are no longer an intra-Community supply, exempted from VAT.
Note: If you are importing goods from the United Kingdom to Finland or exporting goods to the United Kingdom, your company will need an EORI number for its Customs transactions as of 1 January 2021. You can apply for the EORI number from Customs (tulli.fi/en).
Deliveries in progress; start date of goods transport occurs before the transition period ends
If the delivery of a good begins (the transportation) at a time when the transition period has not yet ended, the current EU rules on intra-Community acquisition and supply, respectively, continue to be followed. This principle applies even if the delivery or the transportation would arrive to its destination after the end date of the transition period.
When a delivery of goods, reported as an intra-Community acquisition or as an intra-Community supply, arrives in Finland, the goods must be presented to the Finnish Customs for clearance. The customs office may demand that the importer demonstrates that the transportation had began before the end date of the transition period.
Getting ready for the end of the transition period – the EU Commission has released the following Notices:
After the transition period, no supply of services between Finland and the UK will be an intra-EU supply (sale or purchase).
Please note that when you fill out your VAT return, no sale or purchase of services in the UK is reported anymore under “Sales of services to other EU Member States” and “Purchases of services from other EU Member States”. Instead, report it as a sale of services to non-EU countries under “Turnover taxable at zero VAT rate”. Finnish companies that sell services to customers in the UK will no longer have to submit the EU VAT Recapitulative Statement.
After the transition period, to sell services to customers in the UK will be seen as selling to a non-EU country, that is, to a “third” country. The VAT on the sale will be taxed in accordance with the provisions that determine the actual country of supply in the VAT Act (= the place-of-supply rules). Accordingly, if any service is regarded as having been sold in the UK – that is, outside the EU – the VAT treatment must be cleared up with the UK authorities.
Starting 1 January 2021, it will no longer be possible to make VAT number checks if the company you do business with is from the UK (with a “GB...” VAT number). However, up to 31 December 2020, you can still make these checks
- in the VAT number validation service
- by phone: 029 497 062 (standard call rates apply)
- by e-mail: eu.vies(at)vero.fi.
The VAT taxpayer company must be able to prove, by presenting its accounting records if necessary, that it has been entitled to VAT-exempt intra-Community supply to the UK, or that it made an intra-Community acquisition from the UK before transition period end. The above also concerns any other transfers of assets that the VAT taxpayer company may have made with a UK counterpart before transition end.
How to request refunds of VAT from the UK and Northern Ireland
For purchases that you make in the UK up to 31 December 2020, log in to MyTax to send your request for refund. The last date to do so is 31 March 2021.
No online requests for refunds can be made relating to purchases you make in the UK on 1 January 2021 or later. If you are about to request a refund for such a purchase, contact UK government services (Gov.uk) for instructions.
You can log in to MyTax to send your request for refund for purchases you make in Northern Ireland – only for goods purchases. The transition period end date is 31 December 2024 for Northern Ireland.
Read more: Refund of VAT to Finnish businesses
Sending requests for VAT refund to Finnish authorities
If a UK company buys goods and services from Finland during the transition period, it can request a refund of the VAT, provided that the UK company is not liable to pay VAT on supplies in Finland. UK companies must submit their requests by 31 March 2021.
After the transition period, UK companies must complete Form 9550 to ask for refund for any purchases made after the end date of the transition.
Companies from Northern Ireland can continue to submit their requests online for purchases made on 1 January 2021 or later as long as the purchase is a purchase of goods. The transition period end date is 31 December 2024 for Northern Ireland.
The United Kingdom as a Member State of consumption
You can still report sales to the UK in the VAT special scheme for tax periods ending in 2020. If you file and pay VAT by its due date, the Finnish Tax Administration will be able to forward the information to the UK on time.
- If you are a self-employed individual registered in Finland, file a tax return and pay VAT for the tax period Q4/2020 by the due date, 20 January 2021.
- However, you can still file the first VAT returns for tax periods up to and including Q4/2020 and pay the related VAT in the special scheme until 31 January 2021. After that, you must file and pay VAT directly to the UK. Further instructions are available from the UK tax authority.
If you notice errors in the tax returns you have filed, you can make corrections to your VAT returns for tax periods up to and including Q4/2020 and pay the related VAT in the special scheme up until 31 December 2021. You must make the corrections within three years from the due date of the tax period.
You can make corrections in the special scheme only if the first return for the tax period has been filed no later than 20 January 2021. Please note that you must submit your corrections and pay the VAT directly to the UK starting 1 January 2022.
Example 1: Sales to the UK were reported for the tax period Q4/2017 on 20 January 2018. The seller can correct the return and pay the related VAT within three years from the due date, i.e. by 20 January 2021.
Example 2: The seller has filed a VAT return on the sales to the UK for the tax period Q4/2020 on 20 January 2021. The seller notices an error in the return in April 2021. They must correct the return and pay the related VAT in the special scheme by 31 December 2021.
Example 3: The seller has filed a VAT return on the sales to the UK for the tax period Q4/2020 on 20 January 2021. The seller notices an error in the return in May 2022. They must correct the return and pay the related VAT directly to the UK.
Example 4: The seller has not filed a VAT return on the sales to the UK for the tax period Q4/2020. The seller notices the matter on 1 February 2021. They must file the return and pay the VAT directly to the UK.
The United Kingdom as a Member State of identification
If a self-employed individual has previously been registered for the special scheme in the UK, for example as a seller of e-services to consumers, they must register for VAT directly in those Member States of consumption where they sell their services. Alternatively, the self-employed individual can register as a special scheme user in an EU Member State (“Member State of identification”) if they want to file and pay VAT in the special scheme.
The self-employed individual registered for the special scheme in the UK must file a tax return and pay VAT for tax periods up to and including Q4/2020 in the special scheme by 20 January 2021. Further instructions are available from the UK tax authority.
When tax returns can no longer be submitted and VAT paid to the UK through the special scheme, you must report your sales directly to Finland on the Tax Administration Form 9568e (VAT special scheme, claim for adjustment). You must also pay VAT directly to Finland. You can request the payment information by calling the Tax Administration service number.
If there are errors in the tax returns for tax periods up to and including Q4/2020, the self-employed individual can make corrections in the special scheme up until 31 December 2021. Please note that the corrections must be made within three years from the due date of the tax period. If you cannot make corrections in the special scheme anymore, you must submit them directly to Finland on Form 9568e.
Example 1: Sales to Finland were reported for the tax period Q4/2017 on 20 January 2018. The seller can correct the return and pay the related VAT within three years from the due date, i.e. by 20 January 2021.
Example 2: The seller has filed a tax return on their sales to Finland for the tax period Q4/2020 on 20 January 2021. The seller notices an error in the return in April 2021. They must correct the return and pay the related VAT in the special scheme by 31 December 2021.
Example 3: The seller has filed a tax return on their sales to Finland for the tax period Q4/2020 on 20 January 2021. The seller notices an error in the return in May 2022. They must submit the corrections directly to Finland on Form 9568e as soon as possible, by the end of 2024 at the latest. They must also pay the related VAT to Finland.
After the withdrawal from the EU, the UK no longer operates in the EU internal market. Accordingly, it will no longer stay within the scope of the duty suspension arrangement.
For companies with taxable EMCS movements from the UK to Finland, the procedure will change.
If the company is an authorised warehouse keeper, goods transported to the UK will be reported as exports in the EMCS system. After that, export declarations will have to be submitted as instructed by Customs.
As goods are cleared with Customs, the company can convey them under the duty suspension arrangement, but this requires that the company is a registered consignor with the appropriate authorisation. The authorisation is granted by the Tax Administration. Companies can apply for the authorisation independently. After it has been granted, the company can take the role of a registered consignor. Alternatively, goods can be consigned by another company that has a registered consignor’s authorisation. The consignee must have a warehouse keeper’s or registered consignee’s authorisation.
- Information on EU rules in the field of excise and the post-transition period rules applicable to Northern Ireland (EU Commission’s “Notice to stakeholders”, pdf)
The SEED on Europa
Users of this service can make checks of excise numbers and the products covered by the authorisations that have been granted to companies. Users can continue the checks to find information on their UK trading partners before the transition period ends.
After the transition period, Brexit’s future impact on Finnish corporate taxpayers’ income taxation depends on the outcome of the talks between the European Union and the UK. In any case, the existing Finland–UK tax treaty will continue to be applied on income taxes as before.
The UK’s exit from the EU (Brexit) has no effect on car tax collected on vehicles imported from the UK to Finland.
More information about car taxation:
If you import a vehicle from the UK to Finland, please read the section Changes to tax assessment and reporting of goods trade.
Also note that starting 1 January 2021, vehicles imported from the UK to Finland must be cleared through Customs.
Read more about customs clearance (tulli.fi):
Question 1: A business enterprise, a VAT taxpayer in Finland, buys goods from a UK seller and receives an invoice that the seller has made out for an intra-Community sale. The date on the invoice is prior to transition period’s end date. The delivery process starts in the UK on a date when the transition period is still ongoing. However, the goods arrive in Finland after the transition period’s end date. Is this purchase an importation of goods?
Answer: No, it is not. If the transport of goods from the UK began before transition period end date, the authorities in Finland will treat this purchase transaction as an intra-Community acquisition.
Question 2: A Finnish business enterprise sells goods from Finland to a UK company in the UK before the end date of the transition period. Delivery of the goods to the UK takes place after the end date by air cargo. Is this sale of goods an intra-Community sale?
Answer: No, if the goods transport began when the transition period had ended.
Question 3: A private individual who is a Finnish citizen buys a car from a dealership in the UK in order to use it in Finland. The car is a ‘new means of transport’ under the definition laid down in the Finnish VAT Act. The seller hands over the car to the private individual on a date before the transition period’s end. The car arrives in Finland on a date when the transition period has ended. Is this an intra-Community purchase?
Answer: Yes, because the transport of the good from the UK began before transition period end date.
Question 1: An employee of a Finnish company travelled to the UK in business in October 2019. How can the Finnish company submit an application for VAT refunds on the purchases (including hotel services) that the employee made during the business trip in the UK?
Answer: The Finnish company can log in to MyTax to send the application. The last date to do so is 30 September 2020.
Question 2: An employee of a Finnish company travelled to the UK in business in April 2020. How can the Finnish company submit an application for VAT refunds on the purchases (including hotel services) that the employee made during the business trip in the UK?
Answer: The Finnish company can log in to MyTax to send the application. The last date to do so is 31 March 2021.
Further information on the European Commission’s website:
- Commission notices on how to prepare for the time after the transition period in different lines of business
- Market Access Database: Information on trading with third countries
- Negotiating documents
- Brexit negotiations and Brexit preparedness
Information on The European Council’s website
Information on other authorities’ websites
Our enquiry numbers are at your service in English, weekdays at 9.00–16.15