VAT rules related to Brexit – What will change from January 2021?

The transition period between the European Union and Great Britain will last until 31 December 2020. Leaving the EU results in changes in settlements with counterparties from the United Kingdom. Check what you should pay special attention to in the transactions.

Selling services to UK counterparties

According to the VAT Act, the place of supply, and thus of taxation of services, is the country of the recipient. As a consequence of leaving the European Community, the United Kingdom is excluded from the possibility to apply taxation rules as intra-Community transactions. It does not matter whether the recipient of the service is registered as a VAT payer, as the 0% rate should always be applied.

Purchase of services from UK entities

Under the new rules, when buying services from UK suppliers from January 1st 2020, your company will receive an invoice taxed in accordance with UK tax law. It means that you will not be able to treat such a transaction as an intra-Community acquisition of services and therefore you will not be able to apply the reverse-charge VAT deduction.

Selling goods to the UK

The new rules oblige entrepreneurs to tax the sale of goods in the same way as for export, i.e. at the 0% VAT rate. An important change is that this is no longer an intra-community transaction. Therefore, it will no longer be necessary to show it in the summary information.

Purchase of goods from counterparties from the UK

When purchasing and transporting goods from a UK seller, please note that under the new regulations this transaction will be treated as an import of goods. Previously it was an intra-Community transaction. Remember that when introducing goods to the European Union from a third country, you will have a number of obligations defined by customs regulations.

Northern Ireland as an exception

The changes, which will come into force on January 1, 2021, do not apply to transactions with Northern Ireland suppliers as it is no longer a signatory to the Brexit Treaty. It is worth noting that the rules of taxation of goods and services remain unchanged.

To sum up, from next year you should be particularly careful when dealing with partners from Great Britain. When making transactions, you should keep in mind the new VAT regulations, because omitting them can have many negative consequences for your business.