Brexit and VAT

The most important consequence for your business, following the change of status of the United Kingdom from EU Member State (*) to third country, will be that the free movement of goods, for which there are currently no customs or tax procedures between the EU and United Kingdom, will no longer be applied. These procedures will therefore be applied in the future.

(*) See, however, the special status of Northern Ireland.

As for the VAT regulation, this change of status will have the following consequences for your business:

  • Your sales of goods to clients located in the United Kingdom will no longer be considered as intra-Community supplies but will be considered as exports, which will be in most of the cases exempted from VAT pursuant to Article 39, par. 1 and 2 of the VAT Code.
  • Your purchases of goods from sellers located in the United Kingdom will no longer be considered as intra-Community acquisitions but will be considered as imports.
     

Effective date of Brexit

The Brexit happened on 31 January 2020.

Then started a transition period, which ends at 31 December 2020 (included).

This transition period is mainly intended to negotiate an agreement about the future relation between the United Kingdom and the EU. During the transition period the United Kingdom is no longer member of the EU, but it is still bound by the European acquis (including the VAT regulation), the financial obligations for 2020 and the international treaties of the EU.
 

Impact of Brexit regarding VAT as from the end of the transition period (established at 31 December 2020)

  • Impact on goods

    Export (*)

    The differences with the intra-Community system which applies between Member States are, concerning the relationship between a Member State and the United Kingdom, as follows:

    • The sale of goods in the United Kingdom is no longer an intra-Community supply, but an export.
    • The legal basis changes: Article 39bis of the VAT Code becomes Article 39, par. 1 or 2 of the VAT Code.
    • You no longer have to mention the VAT number of your clients located in the United Kingdom on your invoice.
    • You no longer have to submit an intra-Community listing of your sales to the United Kingdom.
    • You must mention the sales of goods to your clients located in the United Kingdom in box 47 of your VAT return instead of in box 46.

    More information about the impact of Brexit on the VAT processing of deliveries of goods from Belgium to the United Kingdom
     

    Import (*)

    The differences with the past system are as follows:

    • The purchase of goods in the United Kingdom is no longer an intra-Community acquisition, but an import.
    • The input VAT remains due, but must in principle be paid to the Customs authorities.
    • You no longer have to mention your purchases of goods from the suppliers located in the United Kingdom in box 86, but in box 87 if you have an authorization ET 14000 of your VAT return. The related VAT must not be mentioned in box 55 anymore, but in box 56 or 57 if you have an authorization ET 14000.

    More information about the impact of Brexit on the VAT processing of deliveries of goods from the United Kingdom to Belgium

    (*) See, however, the special status of Northern Ireland.

  • Impact on services

    For most of B2B services (business to business) there is no change. The place where the service is deemed to have taken place remains unchanged.

    In concrete terms:

    • United Kingdom --> Belgium: Belgian VAT remains due on the supply of services.  You must pay it in your periodic VAT returns.
      You do no longer have to report services purchased from suppliers in the United Kingdom in box 88, but in box 87 of your VAT return, and the corresponding VAT must no longer be filed in box 55, but in box 56.
    • Belgium --> United Kingdom: your business must not charge Belgian VAT.  The mention “autoliquidation” (reverse charge procedure) must not appear on the invoice anymore.
      You do no longer have to report services rendered to clients in the United Kingdom in box 44, but in box 47 of your VAT return.
      Services supplied to clients in the United Kingdom must not longer be reported in the intra-Community listing.

    More information about transport of goods
     
    More information about “intellectual and intangible” services

  • Impact on financial and insurance transactions

    Brexit will affect the input VAT deduction right of taxable persons in Belgium who carry out financial and insurance transactions referred to in Article 44, par. 3, 4° to 10° of the VAT Code and brokerage services or mandates related to these transactions (banks, insurance companies, financial institutions).

    Indeed, when their co-contracting party is established in the United Kingdom, it will be considered as established outside the EU. Hence, these taxable persons will be able to deduce the input VAT related to above mentioned financial and insurance transactions, pursuant to Article 45, par. 1, 4° and 5° of the VAT Code.

  • Impact on the filing of intra-Community statements

    Any Belgian business which, during the period from 1 January 2020 until 31 December 2020 (included), carries out intra-Community transactions with taxable persons located in the United Kingdom must mention these transactions in its statement(s) of intra-Community transactions (*). This obligation remains, although as of 1 January 2021 (end of the transition period) the European VIES on-the-web system will no longer be able to check and to validate the necessary data. The intra-Community listing of the 4th quarter 2020/December 2020, including the last transaction with the United Kingdom, must be filed at the latest on 20 January 2021.

    You must validate the VAT numbers of your intracommunity partners at the moment of the sale and at the latest on 31 December 2020. You also must keep these evidences in case of a possible audit by the tax authorities.

    (*) See, however, the special status of Northern Ireland.

  • Impact on VAT refund

    By 31 March 2021 at the latest, you must file your request for refund of the British VAT related to transactions carried out in 2020 through the application Intervat - VAT Refund (*).

    For the formalities regarding the refund of the British VAT related to transactions carried out as from 1 January 2021, please contact the British VAT Authorities which have the exclusive competence in this matter.

    (*) See, however, the special status of Northern Ireland.

    More information about the impact of Brexit on the VAT refund claims

  • Impact on the obligation of VAT identification

    As from 1 January 2021, the taxable persons established in the United Kingdom will no longer be taken into account for a direct VAT identification in Belgium.

    As a taxable person established in the United Kingdom who wants to get himself identified for VAT purposes in Belgium, you must appoint a responsible representative located in Belgium.

    If you already have a direct VAT identification number in Belgium, you must, turn it into an individual VAT identification number at the latest on 31 March 2021 while appointing a responsible representative. You keep the same number.

    More information about the impact of Brexit on the obligation of VAT identification

  • Impact on determining the person liable to pay VAT

    As from 1 January 2021, if he/she wants to be registered for VAT purposes in Belgium, every taxable person in the United Kingdom must, before carrying out any taxable transaction in Belgium for which he/she has to pay the Belgian VAT, appoint a responsible representative established in Belgium.

    Therefore, as a taxable person in the United Kingdom, you can become liable to pay the Belgian VAT when the general regulation or a specific rule of reverse charge to the co-contracting party must be applied, as is the case, e.g., for construction works.

    The provider of services or the supplier, who is not located in Belgium and with whom you do business transactions, must no longer be identified in Belgium for VAT purposes.

    More information about the impact of Brexit on determining the person liable to pay VAT

  • Impact on MOSS system

    As from 1 January 2021 the United Kingdom will stop being part of the Mini One Stop Shop (MOSS).

    VAT on telecommunication, broadcasting or electronic services that you have carried out in the United Kingdom at the latest on 31 December 2020, must be reported and paid via the Intervat/MOSS return related to the 4th quarter 2020, which must be filed at the latest on 20 January 2021.

    Till 31 December 2021 at the latest, it will be possible to make corrections on previous Intervat/MOSS returns (regarding transactions performed before 1 January 2021) filed in a Member State for services supplied in the United Kingdom until 31 December 2020 at the latest.

    Are you a British taxable person and would you would like to continue using MOSS after Brexit and the transition period? You need to register in a EU Member State.

    More information about the impact of Brexit on MOSS

  • The special status of Northern Ireland

    Article 8 of the Protocol on Ireland and Northern Ireland (“the Protocol”), which is part of the Withdrawal Agreement (Council agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (OJ C384 I of 12 November 2019, p. 1) provides in a special status, regarding VAT, of Northern Ireland.

    In accordance with this protocol, Union legislation on VAT will continue to apply in Northern Ireland also after 31 December 2020 as regards goods so as to avoid a hard border between Ireland and Northern Ireland. For services, on the other hand, Northern Ireland is, together with the rest of the UK, considered as outside the EU from 1 January 2021.

    In order for the EU VAT system to function properly, it is essential that taxable persons carrying out supplies of goods (including so-called “intra-Community supplies”) or intra-Community acquisitions of goods (including by non-taxable legal persons) in Northern Ireland, are identified for VAT purposes with a VAT identification number granted according to the EU rules. This allows a distinction to be made with the taxable persons making transactions according to the UK VAT legislation.

    Therefore, it is proposed that VAT identification numbers in Northern Ireland have the specific prefix “XI” (see: Proposal for a Council Directive of 7 Augustus 2020, with reference COM (2020) 360 final).

    Your attention is drawn to the fact that the European Union and the British authorities do not agree for now about the implementation of the Protocol on Ireland and Northern Ireland. The VAT regulation which applies in the relations between the European Union could thus differ from the regulation presented in these FAQs.

    More information on the special status of Northern Ireland