Brexit’s impact on taxation

The UK’s exit from the EU will bring changes to cross-border trade. Find out whether Brexit affects your company’s taxation and what measures or changes may be needed. Study the procedures and rules that apply to trading with non-EU countries. 

Please read the guidance below regarding how Brexit can affect your taxation. The effects will vary depending on whether the UK withdraws from the EU with or without an agreement.

Up-to-date information on Brexit is available on the website of the Finnish Prime Minister’s Office.

Exit without agreement – impact after the UK is no longer in the EU

Impact on citizens

Brexit has no direct impact on individual taxpayers’ income tax. There are some exceptions, however, such as work that is done in the UK and entitles to a tax credit for household expenses, and a voluntary pension insurance policy taken out in the UK. 

If you buy goods in the UK or bring removal goods from the UK to Finland, you must clear them at Customs. More information on the Customs website 

Brexit has no effect on car tax collected on vehicles imported from the UK to Finland.  

Impact on businesses

The UK turns into a non-EU country. All goods moving between the UK and the EU must be cleared at Customs.

Goods brought by a company from the UK to Finland are regarded as imports.

When an importer

Goods sold by a company from Finland to the UK are no longer regarded as tax-exempt intra-community supply. Instead, they will be treated as tax-exempt export sales.

Additional information:

The UK turns into a non-EU country. Sales of services between Finland and the UK will no longer be treated as intra-EU service sales or purchases. Sales of services to non-EU countries will be taxed in accordance with the provisions of the VAT Act concerning the country of supply. If, according to the provisions on the country of supply, the service sales take place outside the EU, the VAT treatment must always be checked with the country where the service is sold.

Please note that in these cases the service sales or purchases must not be entered in the sections “Sales of services to other EU Member States” and “Purchases of services from other EU Member States” on the VAT return. You must report the sales of services to non-EU countries in the VAT return’s “Turnover taxable at zero VAT rate” section. No recapitulative statement is submitted on sales to non-EU countries.

Read more about VAT in foreign service trade (in Finnish and Swedish)

VAT numbers of UK trading partners can no longer be verified after Brexit.

Until then, you can verify the validity of VAT numbers

The VAT taxpayer company must be able to prove, by presenting its accounting records if necessary, that is has been entitled to VAT-exempt intra-community supply to the UK, or that it had made an intra-community acquisition from the UK prior to Brexit. The above also concerns any other transfers of assets that the VAT taxpayer company may have made with a UK counterpart in advance of the date of Brexit. Note: after Brexit, VAT numbers of UK trading partners can no longer be verified.

If the UK exits the EU without a withdrawal agreement, all electronic data transfer between the UK and the EU will immediately stop at the moment the withdrawal comes into force. This will affect electronically submitted requests for VAT refund.

Acquisitions in the UK before Brexit

You can request a VAT refund in the ALVEU service until 2 pm on 31 October 2019. MyTax will replace the ALVEU e-service in November 2019. Read more about changes

After Brexit, you can no longer submit refund requests electronically. Instead, the requests must be made directly to the UK. Please contact UK government services (Gov.uk) for instructions on VAT refunds.

Read more: Refund of VAT to Finnish businesses from other EU countries

Acquisitions in the UK after Brexit

The electronic procedure for VAT refund requests between EU countries cannot be applied to acquisitions between the UK and the EU after UK’s withdrawal. If the acquisitions concern the time after Brexit, please contact the UK government services (Gov.uk) (Gov.uk) for instructions on VAT refunds.

British company

If a UK company buys goods and services from Finland, they can request a refund of the VAT included in the purchase price, provided that they are not liable to pay VAT on sales conducted in Finland. After Brexit, requests for VAT refund from Finland cannot be submitted electronically. Request a VAT refund from Finland on Form 9550.

Read more: Refund of VAT to foreign businesses established outside the EU

If the UK exits the EU without a withdrawal agreement, it will affect the filing of VAT special scheme tax returns. 

Sales conducted after Brexit cannot be filed on a VAT special scheme return. Instead, the sales must be reported directly to the UK. Further instructions are available from the UK tax authority.

Any corrections relating to earlier tax periods should be made before Brexit. After Brexit, corrections relating to earlier tax periods must be reported directly to the UK.

If the company’s current Member State of identification is the UK, they must register in some other EU Member State in order to continue using the special scheme. They can also register for VAT in Finland.

Please note that MyTax will replace the VAT Special Scheme e-service in November 2019.

After the withdrawal from the EU, the UK no longer operates in the EU internal market and is therefore no longer 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 in future. Export declarations will then 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 a registered consignor’s authorisation. The authorisation is granted by the Tax Administration. The company itself may act as the registered consignor. The goods can also 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.

SEED on Europa

In the SEED on Europa service, you can validate excise numbers and product details of an authorisation. Where UK trading partners are concerned, their information can be validated until Brexit takes place. 

More information on the handling of movements ongoing at the time of the withdrawal is available in the guidance published by the Commission (pdf)

The UK withdrawal from the EU has no direct impact on corporate taxpayers’ income tax.


 

Frequently asked questions

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 the UK’s withdrawal from the EU. The delivery process starts in the UK on a date before the UK’s withdrawal, but the consignment arrives in Finland after the withdrawal. Is this purchase an importation of goods?

Answer: Yes. The Finnish company must clear the consignment through Customs. It must submit a VAT return to the Tax Administration containing information on VAT to be charged on imports of goods. Finnish authorities will not treat the purchase as an intra-Community transaction.

Question 2: A Finnish business enterprise sells goods from Finland to a UK company in the UK at a time when the withdrawal from the EU has not yet taken place. Delivery of the goods to the UK takes place after Brexit by air cargo. Is this sale of goods an intra-Community sale?

Answer: No, it is not. Instead, the sale must be considered exports of goods outside of the EU. The VAT rules on exports of goods will apply.

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’ by the definition laid down in the VAT Act. The seller hands over the car to the private individual on a date when the UK’s withdrawal from the EU has not yet taken place. The car arrives in Finland on a date when UK’s withdrawal from the EU has already happened. Is this an intra-Community purchase?

Answer: No, it is not. The Finnish Customs will charge VAT on imports on the value of the goods that were imported. Purchases of a ‘new means of transport’ are not taxed in Finland under the intra-Community VAT scheme.

 

Question: 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: You can submit the application in ALVEU until 02.00 pm, 31 October 2019. After that, ALVEU will close down.  MyTax will replace the ALVEU e-service in November 2019. After Brexit, it will be necessary to send the applications directly to the UK authorities. The Finnish company must submit the application by 30 September 2020.

 

Agreement reached and transition period begins – impacts

Impact on citizens

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. The agreement contains an option that the transition period may be extended once.

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. The agreement contains an option that the transition period may be extended once.

During the transition period, the current rules and guidelines relating to value-added tax and excise duties are applied.

During the transition period, the UK

  • will be in the EU internal market and the Customs Union
  • will comply with EU legislation and international treaties
  • will not participate in EU decision-making.

Further information about the withdrawal agreement (Finnish Prime Minister’s Office)

Read more