Fiscal Representation Post-Brexit – Requirements for UK Companies Trading in the EU

Andy Spencer
September 21, 2021

Non-EU companies are required to appoint a Fiscal Representative in order to be registered for VAT in many Member States.

Following the end of the Brexit transition agreement on 31 December 2020, this was a consideration for UK companies who wanted to remain registered or had to register as a result of changes to supply chains brought about by Brexit.

Unfortunately, the position was complicated as the EU-UK Trade and Cooperation Agreement (TCA) which provided the framework for the UK’s ongoing relationship with the EU was only released on 24 December 2020 so many tax authorities had not finalised their position. This led to considerable confusion in the early months of 2021 with the position being unclear in many territories.

Some tax authorities deregistered UK businesses if they didn’t appoint a Fiscal Representative whilst others removed the requirement for UK businesses to appoint one. Countries that removed the requirement included Belgium, France and Italy where many UK businesses are registered.

The future of Fiscal Representation for UK Companies in the EU

The logic behind the decision was that the TCA potentially had the necessary mutual assistance and recovery provisions so that there was equivalence with the Mutual Assistance and Recovery Directive (MARD) to which the UK was party prior to 31 December 2021.

MARD provides a framework for the tax authority in one Member State to use the tax authority in another to recover debts and obtain information about taxpayers that are resident there. If this applied between the UK and the EU due to the TCA, there would be no need for Fiscal Representatives as assistance with recovery and obtaining information could be achieved by other means.

The requirement for a Fiscal Representative is the decision of each individual Member State but it was clear that many tax authorities were looking to the European Commission for guidance on what to do.

The expectation was that the European Commission would decide on equivalence but this was continually delayed which resulted in Member States having to make their own determinations about what to do. Some of the tax authorities that removed the requirement for UK companies stated that it was conditional on equivalence being granted whilst others were silent on the matter.

Implementing Decision (EU) 2021/942

On 10 June 2021 the European Commission issued Implementing Decision (EU) 2021/942 which confirmed only Norway is considered to have an agreement which has equivalence to MARD. This Decision was specifically in respect of the requirement to appoint an intermediary when using the Import One Stop Shop (IOSS).

However, it is apparent that some Member States are using the decision as a basis for reviewing the requirement for Fiscal Representation for UK companies. One such Member State is Lithuania which has recently stated that UK companies would have to appoint a Fiscal Representative by the end of October 2021 in order to remain registered for VAT.

It remains to be seen whether other Member States will go down the same path as Lithuania. Many UK companies started the process of appointing a Fiscal Representative only for the application to be put on hold when local rules changed, removing the immediate need. There is now the prospect that new applications will be required if countries change their position again.

Fiscal Representation and the EU E-Commerce VAT Package

One factor that has changed since early 2021 is the introduction of the EU E-Commerce VAT Package on 1 July 2021. It has considerably extended the scope of the Mini One Stop Shop into the One Stop Shop for intra-EU B2C supplies of goods. This allows accounting for VAT on such supplies in a single Member State, thereby removing the need to be registered in multiple countries.

This has the scope to reduce the requirement for Fiscal Representatives for e-commerce businesses if they decide that it is the right option for their business. UK businesses outside of e-commerce will need to wait to see how the requirement for Fiscal Representatives develops in the coming months.

Take Action

Does your business require a Fiscal Representative? Speak to our team of VAT experts or download our Post-Brexit VAT Rules e-book for the latest guidance on how to protect your cross-border trade.

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Author

Andy Spencer

Andy is a highly experienced indirect tax professional who has worked in VAT for over twenty five years. Andy joined Sovos in 2009 and has responsibility for the consulting and compliance teams. Within the consulting team, he is involved in delivering major international VAT projects for blue-chip clients, bringing expertise in both structural compliance and commercial efficiency. Andy specialises in providing clients with bespoke VAT reviews that help them develop into new territories with the appropriate controls in place to manage VAT effectively. Andy has developed expertise in international VAT throughout his career and has advised on a broad range of issues in many countries. Within the compliance team, Andy is responsible for the integrity and professionalism of Sovos’ compliance offering working with the team to ensure clients meet their compliance obligations around the EU and beyond. Andy began his career with HM Customs & Excise and before joining Sovos was VAT Director at Baker Tilly’s Southern UK operation, a Senior VAT Manager at KPMG for six years, and a Senior VAT Manager at Ernst & Young for seven.
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