Since January 1st 2021, as a result of the Brexit, the VAT treatment applicable to trade with the United Kingdom has changed substantially. Many changes are taking place and have a significant impact on Belgian companies.
In this article, we provide you with a brief overview of some of the Brexit results with regards to VAT:
- Supplies of goods between taxable persons
As the UK is now outside the VAT territory, shipments of goods between taxable persons (B2B) from an EU Member State to the UK or vice versa are no longer considered as intra-Community transactions exempt from VAT in the Member State of departure or as intra-Community acquisitions of goods taxable in the country of destination of the goods.
These transactions are now exports – exempt from VAT in the Member State of departure – or imports taxable on arrival under the VAT provisions applicable in that territory.
This change implies inter alia that:
- The legal provision relating to the export is mentioned on the invoice (i.e. Article 146 of the VAT Directive or Article 39 §1 or §2 of the Belgian VAT Code);
- The entry into or exit of goods from the territory of the European Union is proven by a set of documents and, in particular, by the customs declaration (on which the exporter of the goods will mention its EORI number) as well as other documents such as transport documents;
- The modification of the reporting of these operations in the VAT declaration: in box  (outgoing transactions) and in boxes ,  and  (incoming transactions);
- The absence of reporting in the statement of intra-Community transactions.
- B2B services
B2B services with the United Kingdom are now considered “extra-Community” services, not intra-Community services.
This change implies, among other things, that:
- These services must therefore be reported in the VAT return: in box  (outgoing transactions) and in boxes ,  and  (incoming transactions);
- They will no longer be reported in the statement of intra-Community transactions.
- The special feature of Northern Ireland
Within the framework of the “Protocol on Ireland and Northern Ireland”, it is provided – for VAT purposes – that Northern Ireland continues to be part of the “European Community”, as far as goods are concerned. The shipment of goods between the Member States and Northern Ireland will continue to benefit from the intra-Community regime.
However, for services, Northern Ireland will be treated as a third territory, in the same way as the rest of the United Kingdom.
- Sending goods to private individuals in the United Kingdom
The “distance selling scheme” no longer applies to businesses selling goods to individuals in the UK. These sales are now considered as an export. Depending on the terms of the sale, the seller may be required to be VAT registered in the UK.
- The Mini One Stop Shop system in B2C transactions
The MOSS scheme is no longer an option for supplies of electronic, telecommunications, radio and television services made by a Belgian taxable person for a particular customer established in the UK. In the event that UK VAT is due on the transaction, the Belgian supplier must refer to the VAT rules in force in the UK.
- The refund of UK VAT
UK VAT incurred by an EU taxable person during the calendar year 2020 will continue to be eligible for refund under the VAT Refund procedure until 31 March 2021 at the latest.
For UK VAT incurred from 1 January 2021 onwards, the EU taxable person will have to follow the refund procedure prescribed by the UK VAT Authorities.
- Financial or insurance services
Belgian taxable persons who carry out financial or insurance transactions as referred to in Article 44 §3, 4° to 10° of the Belgian VAT Code for customers established in the United Kingdom may benefit from a more interesting right of VAT deduction, as the charges relating to these transactions may be deductible pursuant to Article 45 §1, 4° and 5° of the VAT Code.
Brexit, as we might expect, imposes new VAT obligations or, at least, imposes special attention in order to comply with the VAT obligations related to the UK’s third country status. While, from a Belgian point of view, the Belgian VAT Authorities have published a relatively comprehensive set of comments, the potential new VAT obligations in the United Kingdom should not be overlooked.
A forthcoming article will be published on the question of VAT registration in Belgium or in the United Kingdom, taking into account the obligation (or not) to appoint a responsible representative.
Tax Consult in collaboration with the correspondents of its network in the United Kingdom is at your disposal for any question in this context.
For more details on these provisions, we invite you to read the FAQs published by the FPS Finance or to contact the VAT Department of Tax Consult at firstname.lastname@example.org. An appropriate answer to your situation will be sent to you.
The VAT Department of Tax Consult A&A