Brexit: new situations for VAT
It has, also because of the coronavirus, disappeared from the daily news, but Brexit is a fact and has a number of consequences in the near future ... amongst others on VAT.
1 January 2021
The UK left the EU on 31 January 2020, but there are transitional arrangements. Notwithstanding the fact that they are meant to enter into a new trade agreement, they give businesses in the EU and the UK a couple of months to prepare themselves to the installation of a new border. Because this is clearly the most profound consequence of Brexit: the end of free movement of goods (both for customs and for VAT). If you ship goods to the UK, it is no longer an intracommunity supply of goods, but an export, and your British purchases are no longer intracommunity acquisitions, but imports.
Supply of goods
If you supply goods to a British taxable client (B2B) after 1 January 2021, this is an export of goods. In practice, such export is also VAT exempt, but based on art. 39 §§ 1 and 2 of the VAT Code. This has practical consequences on the information to be quoted on your invoice and the boxes to be filled out on the VAT return.
When you supply goods to a private person in the UK (B2C), this will no longer be under the distance sales scheme: after 1 January 2021, it is also a VAT exempt export of goods.
Attention: there is no clarity on how the UK will treat the 'import' of such goods. Probably VAT will be due at the time the goods enter the UK, but most probable other obligations will also apply at that time.
In the other direction, if you (as a business) buy goods in the UK, this will be an import. Import from third countries is subject to Belgian VAT at the time the goods are declared for free circulation for customs purposes. Customs procedures exist whereby VAT is not immediately due, e.g. placing the goods in a customs warehouse.
VAT is normally due by the client; however, the supplier can choose to have the capacity of debtor of the VAT. The supplier (in our hypothesis the British supplier) should then be VAT registered in Belgium (individual identification though a responsible representative or global representative). In case of a supply with installation this is even obliged.
Supply of services
As a general rule, for services supplied in a B2B context VAT is due according to the place of supply of the services. When a UK service provider supplies services in Belgium, Belgian VAT is due. For transport services and services in a B2C context, please contact your advisor to analyze the situation at hand: too many hypothesis exist to treat this within the framework of this article.
Listing of intracommunity transactions
All intracommunity transactions between today and 31 December 2020 should, as before, be reported in the listing of intracommunity transactions. One of the obligations you have in this respect is to verify whether the customer in the other country (the UK) is a VAT payer. You have to do this by checking the VAT identification number in the European VIES system.
Attention: as from 1 January 2021 you cannot use this system any longer to verify and validate the data of UK VAT payers. The VAT authorities therefore advice to take print screens of every VIES screen with the consulted and validated data of your customer and keep these for at least 7 years, or to request for customs declarations for goods arriving at the UK border after 31 December 2020 in order to be exported.
Impact on refund of foreign VAT
For transactions within the EU you can apply for VAT refunds through VATREFUND, e.g. when you have paid VAT on the purchase of goods in another EU member state. This will also stop for transactions in the UK, more specific as from 1 April 2021.
For transactions of 2019, you should file your application ultimately 30 September 2020. For 2020, you will only have time until 31 March 2021!
It is to be expected that as from 1 January 2021 if you buy goods to be exported, you probably will obtain an exemption of the local sales tax in the UK (you will still have to pay import VAT in Belgium). How to obtain this exemption or refund in the UK is to be further determined.
How fast will it go?
The transitional arrangements apply as said until 31 December 2020, pending an agreement on a new trade treaty. But, believe it or not, this period can be extended once with a one or two-year period. The decision on such extension should be taken before 1 July 2020. The British Prime Minister already made clear that there will be no further extension. However, the past has shown that a sudden plot twist never can be excluded.