No-deal Brexit – Commission’s instructions and interpretation guidelines
The Commission has published instructions and interpretation guidelines to be followed if the UK exits from the EU without a withdrawal agreement. This page contains summaries of the Commission’s guidelines regarding VAT.
Value-added taxation – interpretation guidelines
These guidelines have been published by the advisory VAT Committee established to ensure cooperation between the EU Member States and the European Commission. The VAT Committee discusses questions related to the application of the VAT Directive and its provisions. The VAT Committee has published four sets of guidelines that are meant to guide the interpretation of the VAT Directive in the case of no-deal Brexit.
The VAT Committee’s report is available in full on the Commission’s website: Guidelines resulting from meetings of the VAT Committee (pdf)
Deliveries from the UK to to EU-27 Member States that are ongoing at the time of withdrawal
The first interpretation guideline concerns the sales of goods within the EU in the situation where the goods have been sold as intra-Community sales from the UK to another EU Member State before Britain’s withdrawal. The transport starts before the withdrawal, but the goods arrive in the other Member State after the UK has withdrawn from the EU.
In order to avoid double taxation of the delivery as both an intra-Community acquisition and an import, the VAT Committee has almost unanimously agreed on the following interpretation: If by virtue of Article 30 of the Council Directive 2006/112/EC on VAT the importation of the consignment takes place in the Member State where the goods are delivered after Britain’s exit from the EU, the delivery is not taxed as an intra-Community acquisition.
Example: A company registered for VAT in Finland purchases an item from a British trading partner on 25 March 2019, and receives an intra-Community invoice for the purchase. The delivery process starts in the UK on 29 March 2019, and the consignment arrives in Finland on 30 March 2019. The Finnish company clears the consignment through Customs. The company reports the import’s VAT details to the Tax Administration on the VAT return. The delivery is not treated as an intra-Community acquisition in Finland.
For more information about filing and paying VAT on imports, see the detailed guidance on value added tax procedure for importation as of 1 January 2018.
2. Re-import of goods after Brexit
The VAT Committee has almost unanimously agreed that Article 143(1)(e) of the Council Directive 2006/112/EC on VAT is applicable to situations where goods have been transported or sent from another EU Member State to the UK before the withdrawal and are then re-imported after the withdrawal.
In accordance with Article 143(1)(e) of the VAT Directive, a Member State must not impose tax on the re-import of goods if the importer is the same as the exporter, if the goods are in the same condition as they were exported, and if the goods qualify for exemption from customs duty.
Example: A company registered for VAT in Finland exports an item from Finland to Britain for use at a trade fair on 20 March 2019.The company re-imports the item in the same condition on 1 April 2019. The company must clear the item through Finnish Customs. The company files an import declaration and states that the item is exempt from customs duty as a re-import. For more information, see the Customs guidance on tax-exempt imports in VAT assessment (available in Finnish and Swedish, link to Finnish). If Customs decides that the re-importation of goods is exempt from duty, the importation is also exempt from VAT. In this case, the company must file details on the tax-exempt importation on their VAT return submitted to the Tax Administration. The VAT basis for the imports is reported under ”Imports of goods from outside the EU”. The amount to be reported under “Tax on imports of goods from outside the EU” is €0.00.
3. Personal property imported after the withdrawal
The third guideline almost unanimously accepted by the VAT Committee concerns the VAT assessment of the importation of personal property belonging to natural persons who move their residency from the UK after the withdrawal from EU.
4. VAT refunds to foreigners
The fourth guideline concerns the refund of VAT on purchases that took place before the UK’s withdrawal from the EU to business operators both in the UK and in EU Member States.
The refunding of VAT between EU Member States is governed by the Council Directive 2008/9/EC. In accordance with Article 7, the refund application must be filed electronically. Since the Directive is no longer applied to the UK after Brexit, the electronic procedure is no longer possible after the withdrawal.
The electronic exchange of information between EU Member States governed by the Council Regulation (EU) No 904/2010 will no longer be possible between the tax authorities of the UK and EU Member States. The Member State of refund must therefore refer all information requests related to refund applications directly to the applicant.
If no refund application has been made, or if the Member State of establishment has not delivered the application to the country of refund before the UK’s withdrawal, the applicant must deliver the application directly to the country of refund. In these cases, refund procedures within the EU will be carried out in accordance with the Council Directive 86/560/EEC on the refund of VAT to business operators not established in the EU territory.
The Council Directive 86/560/EEC decrees that Member States are entitled to require third countries to act reciprocally, name a tax representative, and meet any further conditions set to them. These requirements cannot be made if the VAT has been paid before the UK’s withdrawal. However, in accordance with Article 273 of Council Directive 2006/112/EC, Member States can require that the applicant provide proof that they are liable to pay the tax and present original documents or their copies.
Even though Directive 2006/112/EU is no longer applied to the UK after the withdrawal, the VAT Committee almost unanimously states that the taxpayer’s rights and responsibilities resulting from the Directive remain in force if the VAT has been paid before the withdrawal. Regarding VAT refunds, these rights and responsibilities include the right to a refund of VAT, the time limit for submitting a refund application, the details that must be included in the application, the time limits for information requests relating to the processing of the application and for issuing a decision on the application, the providing of further information, the time limit for paying the refund, and the right to receive interest on the refund if the payment is late. In addition, the VAT Committee states almost unanimously that the refund application is considered to relate to the end of the calendar year if the VAT was paid in the time period 1 January – 29 March 2019. In this case, the refund amount must be at least €50.