Our Brexit and VAT series aims to offer the vital information and planning tips businesses operating cross border need. This week, we’re addressing fiscal representation in the EU. As the UK is now a third country from a VAT perspective, there are various urgent steps businesses must take.
Post-Brexit Fiscal Representation in the EU
Fiscal representatives are effectively an insurance policy for tax authorities, for whom they protect the ability to collect VAT. Member States in the EU have different positions on fiscal representation. Some require non-EU businesses to make a local appointment if the business requires a VAT registration.
Fiscal representatives are local businesses acting on behalf of non-EU companies. They often assume joint and several liability for VAT. Businesses who perform this role must meet a series of measures set out by the Member State in question. They often must be authorized to act by the relevant tax authority.
When do I need a fiscal representatives?
There are two common situations in which fiscal representatives are needed. The first is where a non-EU business registers in a Member State where fiscal representation is required. Fiscal representation is imposed in different ways, and at the Member State’s discretion – so in some countries it’s mandatory for all non-resident businesses liable to register, whilst in others it depends on the taxpayer’s activity. Equally, some tax authorities don’t require it, whilst others make it optional.
The second common scenario for fiscal representation is where the appointment of a fiscal representative offers a business access to a beneficial VAT regime, as is the case in the Netherlands in respect of the postponement of import VAT.
Post-Brexit, the UK will become a third country for VAT purposes. Most EU nations require fiscal representation for non-EU businesses – with some notable exceptions like Germany – so all businesses that choose or must remain registered in EU nations after 31 December must determine the position of the countries in which they operate.
What are the issues to be aware of?
As many companies restructure supply chains to mitigate the consequences of Brexit, situations arise where they require VAT registrations for the first time. If the country which requires registrations demands fiscal representation, then businesses must look to appoint a local fiscal representative.
UK businesses are in a particular and complex situation. Tax authorities are struggling under the weight of mass applications for fiscal representatives, as significant need has been generated in a relatively short time. As a result, some Member States are issuing specific guidance to UK companies, and others may follow suit. France, for example, has recently clarified that UK companies don’t need to appoint a fiscal representative. Though full details and guidance are yet to arrive, this should be cause for a sigh of collective relief for all UK businesses registered for VAT in France. But beware differing positions – Belgium previously advised all UK businesses who hold non-resident VAT registrations that they require fiscal representation before the end of 2020. They relaxed this position, with the authorities offering an extension until June 2021. The coming weeks may see other Member States taking similar approaches.
Whatever individual Member States’ positions, there are time considerations to be aware of. The amount of risk that fiscal representatives take on for a company is significant. So the process for securing fiscal representation is often lengthy and can involve financial guarantees.
Fiscal representation is here to stay – so planning now is fundamental. Regardless of Brexit, the process for establishing EU fiscal representation for VAT is time consuming. As a result, businesses must act fast to establish the necessary support needed in the countries where there is a requirement to register.
Essential steps are an urgent and ongoing review of different tax authority positions, and careful planning for the associated administrative and financial costs.
For more post-Brexit related content:
Keen to know how Brexit will impact your VAT compliance obligations? Register for our upcoming webinar Brexit and VAT: Protect your valuable supply chains and minimise costly disruptions to find out more.