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New terms of import VAT payments for UK and EU sellers post-Brexit

Goods moving between the UK and EU 27 member states will become liable to import VAT payments after 31 December 2020 when the UK leaves the EU VAT regime as part of Brexit. But, with careful planning EU or UK traders can avoid the cash payments required and keep goods flowing. This can be down through countries’ postponed accounting or deferred VAT regimes. UK businesses with EU VAT registrations will also need a special fiscal representative. Richard Asquith, VP global indirect tax at Avalara explains

If suppliers of goods switch to Delivered Duty Paid (DDP) INCOTERMS, they can take care of the customs processes and import VATand ensure there is no interruption of goods movements after Brexit, and limit import taxes.

Postponed Accounting – deferring import VAT payments through VAT return

When the UK leaves the EU VAT regime on 31 December 2021, movement of goods between the UK and EU27 member states will become subject to import VAT in the country where the goods are cleared though customs. UK VAT is currently 20%; the average EU VAT rate is over 21%.

Postponed Accounting, or Deferred VAT, allows any importer with a local VAT registration to defer the import VAT due when they import goods into the UK or EU. The importer simply reports the VAT due and recoverable in their next return, and therefore no cash need be paid.

Which countries provide import Deferred VAT?

Many EU countries now allow Postponed Accounting. The UK Postponed Accounting will start from 1 January 2021 – and there is no need to apply with HMRC.

EU member state

Deferred VAT scheme

 

 

Belgium

UK, non-EU and other companies may apply for VAT deferment on importing. 

France

Allowed. With some track record of compliance and financially stable. Non-EU businesses must appoint a Fiscal Representative.

Germany

Limited. There is only the possibility to delay import VAT payments via a bank guarantee to the tax authorities

Ireland

Allowed. Introducing an import postponed accounting regime following the announcement of Brexit.

Italy

No postponed accounting for Italian import. Businesses must complete a VAT recovery claim – 8th Directive for EU businesses and 13th Directives for non-EU businesses, which includes the UK from 2021.

Luxembourg

Postponed accounting on import VAT is permitted through a VAT registration.

Netherlands

A special ‘Article 23 License’ is required for import VAT deferment. This will require a bank guarantee with the tax authorities. A non-EU businesses is required to appoint a Fiscal Representative. The Dutch Brexit Fiscal Rep requirements was clarified in September 2020.

Poland

Has recently extended its postponed accounting regime for importers.

Spain

Limited to large tax payers, taxpayers on refund regime or groups companies

Sweden

Postponed accounting permitted 

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