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Post-Brexit VAT Rules
Get the latest guidance on how to comply with VAT rules post-Brexit and how to protect cross-border trade.
Post-Brexit: Businesses Must Have a VAT Compliance Plan-of-Action in Place
Brexit is here
UK and EU businesses need to rise to the VAT compliance challenge that Brexit poses. Now more than ever, it’s time to review supply chains and VAT records to trade with EU Member States. The transition period ended on 1 January 2021 and, as a result, trade between the UK and EU is now governed by the Free Trade Agreement announced on Christmas Eve 2020.
While many businesses prepared for Brexit’s impact on customs, many are yet to formulate a strategy to ensure VAT compliance. This is key to the success of any Brexit plan-of-action for the protection of supply chains, allowing companies to continue to trade confidently across Europe.
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Latest Changes
Complemento de leyendas supplements for virtual importation of product components (for example, tires on cars or sugar in soda) are now required for maquiladoras, or American-owned factories operating across the Mexican border.
The process for cancelling a CFDI, or e-invoice, changed in November 2018 and requires suppliers to submit cancelation request instead of credit notes to void a previously issued invoice/CFDI . In addition, it requires the buyer to accept or reject the request within 72 hours
The frequently used supplement of payment, which affects all transactions where a partial or complete payment is received after a CFDI is issued, took effect in September 2018.
Quick Facts: Brexit VAT implications
- The UK agreed a Free Trade Agreement (FTA) with the EU
- The FTA doesn’t impact VAT obligations – it affects duty rates, tariffs etc
- The concept of dispatches and acquisitions will be replaced by exports and imports for trade between Great Britain and the EU since Great Britain is now considered a third country
- Special rules apply for trade between NI and the EU
- Special rules also apply for goods moving between Great Britain and Northern Ireland
- Where there is no postponement or deferment mechanism in place, import VAT becomes an upfront cost to the business
- UK businesses registering in an EU Member State may require fiscal representation
What’s impacted by Brexit?
- Exports and imports replace dispatches and acquisitions
- Potential increased liability to register in EU Member States
- Increased likelihood of needing fiscal representation
- Recovery taking place via paper-based systems
- Reciprocity possibly blocking 13th Directive claims
VAT post Brexit: What needs to be done?
Although there is a FTA agreement, many problems remain unresolved. As such, businesses must ensure they:
- Identify all supply chains impacted by Brexit
- Pay special attention to contracts with Delivered Duty Paid (DDP) incoterms
- Determine where companies still need to hold VAT registrations in the EUEstablish if there are any new VAT registration requirements
- Consider customs requirements, such as EORI numbers in the UK and EU
- Plan for changes necessary to meet VAT reporting requirements
- Amend ERP systems as appropriate
- Determine if fiscal representation is needed
Reduce the impact of Brexit
Need help to ensure your business operations can continue?
Businesses on both sides of the channel have much to do to prepare. We know the uncertainty Brexit generates is difficult to manage, so businesses need to be ready.
During this confusion, we can deliver clarity about the Brexit impact on your VAT compliance obligations.