In principle, next March 29, 2019 is the date for no deal of the United Kingdom from the European Union. As of today, the Parliament of the United Kingdom has not ratified the agreements reached between the government of that country and the European Union. If that date arrives with no deal, the exit will have important consequences, from the point of view of indirect taxation (Customs, VAT and Excise Duties), for economic operators both in the EU and in the United Kingdom.
For this reason, we consider it important that companies that have transactions with the United Kingdom take the necessary measures so that arrival on March 29 without a deal are prepared and their day to day is not paralyzed.
Customs and International Trade
From a customs point of view, the exchanges of goods between the United Kingdom and the EU Member States will become import and export operations, so the flow of goods will be subject to the same customs formalities as goods from third countries. Among the implications we can highlight:
- Flow of goods between UK and EU will be import and/or export operations.
- The UK EORI number will no longer be valid in the European Union, as of March 30th, 2019.
- Any license, BTI, certificate, etc. issued by the United Kingdom Customs Authorities shall cease to be valid in the European Union.
- As a third country, for all purposes, the United Kingdom will be subject to all prohibitions and restrictions on imports and/or exports of goods existing in the European Union, in order to protect health, safety and security and environment.
- UK will be treated as any other country belonging to the WTO, without the application of preferential agreements signed between the European Union and certain third countries or areas.
- Application of the rules of origin established in the European Union to products coming from or originating in the United Kingdom. United Kingdom is no longer considered for the purposes of the rules of cumulation to determine the EU origin of goods.
- Impossibility of linking customs and fiscal regimes in trade with the United Kingdom.
- Disappearance of indirect export and imports.
- Application not only of customs controls but also para-customs, especially sanitary, health, phytosanitary, etc.
- Special attention to dual-use technologies, defense materials, chemical products, pharmaceuticals, animals, products of animal origin, cultural assets, etc.
VAT treatment related to Goods
- As of March 30th, 2019, Directive 2006/112 / EC on VAT and Directive 2008/9/ EC on refund of VAT established in another member State of the EU are no longer applicable in the United Kingdom.
- Transactions with the United Kingdom are no longer considered intra-community deliveries and/or acquisitions of goods and services to become exportations or importations of products.
- In the case of purchases of goods from the UK, the taxable base for VAT on importation will be the customs value of the imported goods plus customs duties, purchase commission, transport and insurance charges to the first place of destination in the member State of import.
- Triangular operations also disappear.
- The system of distance sales with the UK will not be applicable anymore, with the existing franchise regime applicable to travelers from third countries.
- As of that date, the VAT Refund regime will apply to travelers with residence in the United Kingdom who buy in the European Union and vice versa. Likewise, the VAT exemption in purchases of travelers with destination or origin UK in duty free stores will be applicable.
VAT treatment related to Services
- Services rendered between UK operators and EU operators will not be considered intra-EU service provisions anymore. Being fundamental, identifying where the service is located, received or borrowed, the nature thereof, who is the recipient of said service and the place of its provision.
- When a UK company has to register for VAT purposes in Spain, the appointment of a Spanish resident tax representative will be mandatory.
- UK companies will no longer be able to operate in the EU One Stop Shop regime in B2C transactions for the provision of telecommunications services, electronic services, radio broadcasting and TV. In the event that they wish to continue operating, they must be registered in a member State of the European Union for the filing of the VAT returns.
- As of March 30th, 2019, the rule of effective use and use set forth in Article 70. Two of the VAT Law will apply to operators in the UK that are recipients of certain services (counseling, auditing, accounting, treatment of data, transfer of personnel, etc.).
- Any refund of Spanish VAT paid by UK operators should be requested by the special VAT refund procedure established for third countries at the Spanish VAT Law, considering that, in order to do so, Spain requires the appointment of a tax representative and that there is reciprocity between Spain and the third country where the operator is resident.
As a consequence of the above, from our point of view, we recommend requesting the refund of the VAT quotas paid during 2018, before March 29, 2019, since until that date the VAT refund procedure established in other EU member States is still in force.
- As we have said before, the transactions carried out with the United Kingdom will be considered as exports and/or imports.
- The accrual of the excise duties of products coming from the UK will take place at the moment of the importation and they will be part of the taxable base of the import VAT; unless their final destination is a factory or fiscal deposit, in which case they will go from the customs border to the factory or fiscal warehouse under excise duty suspended relief and import VAT exempted.
- The intra-EU circulation regime with UK disappears for products subject to excise duties. Likewise, the suspensive regime of the excise duties with UK, the EMCS and the accompanying documents disappear as well.
How can we assist you?
From Salinas & Partners we recommend anticipate the necessary measures to have the company prepared for the case of arriving at March 29, 2019 without agreement. With more than 30 years of experience in indirect taxation and, above all, in matters of foreign trade, we are at your disposal for any questions or comments that may arise.