VAT consequences of the Brexit

With the expiry of the transitional period, the VAT status of the United Kingdom will also change at the turn of the year, which will have consequences for trade in services and goods.

On January 31, 2020, the United Kingdom left the European Union. The transition period in which EU VAT law continues to apply to the United Kingdom also ended on December 31, 2020. The tax authorities have now commented on the VAT consequences of the end of the transition period.

• Sales tax status: In principle, the United Kingdom is to be regarded as a third country territory for VAT purposes after December 31, 2020. An exception applies to Northern Ireland, for which a special status has been agreed. While Great Britain is generally considered a third country territory, Northern Ireland will continue to be treated as part of the Community territory for the purposes of VAT on the movement of goods. For services, therefore, both Great Britain and Northern Ireland are considered third country territories. Northern Ireland VAT registration numbers are given the prefix "XI". Such VAT registration numbers are deemed to have been issued by another member state.

• Deliveries at the turn of the year: After December 31, 2020, trade in goods with Great Britain will be subject to customs formalities. The movement of goods between the EU and Northern Ireland is not affected by this. However, the Withdrawal Agreement contains a transitional arrangement for goods movements between a member state and Great Britain that begin before January 1, 2021 and end after December 31, 2020. The regulations for the taxation of intra-Community trade in goods must be applied to such transactions and a VAT registration number for traders based in the United Kingdom (country prefix "GB") must be used.

  

• Continuous performance: Brexit has an impact on permanent services that are provided over the course of the year. However, there is no difference between Great Britain and Northern Ireland. The time of performance of the service is decisive for VAT treatment. In the case of permanent supplies for a limited period of time, the supply is completed when the corresponding legal relationship ends. Therefore, if the provision of a supply begins before January 1, 2021 and ends after December 31, 2020, the circumstances at the time of termination are decisive for the assessment of the entire supply. This applies accordingly to partial services.

• Mini-One-Stop-Shop: Sales made to private customers in the UK before January 1, 2021 can be declared to the Federal Central Tax Office (BZSt) in the tax return for the corresponding quarter. However, tax returns for periods up to and including the 4th quarter of 2020 must be received by the BZSt by January 20, 2021 in order to effect a declaration of turnover under the mini-one-stop-shop procedure. The mini-one-stop-shop procedure can no longer be used for declarations that were not submitted to the BZSt on time or for services provided to private customers in the UK from 2021 onwards. These transactions must be treated in accordance with the tax laws of the United Kingdom. Corrections to tax returns for tax periods up to and including the 4th quarter of 2020 can be submitted by the end of 2021 at the latest, provided that the correction relates to a return submitted by January 20, 2021 at the latest.

• Confirmation procedure: After December 31, 2020, it will no longer be possible to check VAT numbers for traders from the United Kingdom (prefix "GB"). Confirmation requests for the traders concerned should therefore be made before January 1, 2021. From January 1, 2021, VAT numbers for Northern Ireland (prefix "XI") can be checked.

• Input tax refund: In deviation from the usual rules for input VAT refund applications, applications for refunds of VAT paid before January 1, 2021 by a trader established in the United Kingdom in Germany or by a trader established in the United Kingdom in Germany must be submitted by March 31, 2021.

• Application decree: Any necessary amendments to the VAT Application Decree will be made at a later date. Insofar as individual provisions of the application decree contradict the rules summarized here, they are no longer applicable to transactions carried out after December 31, 2020.