18 April 2018

Brexit: customs and indirect taxes if Great Britain turns into a third country

The two-year deadline that started on the date Great Britain announced its intention to exit the EU will expire on 29 March 2019. If Britain and the EU do not agree on a specific transitory period by then, any and all primary and secondary EU laws will cease to be effective in Britain on 30 March 2019, turning Britain into a third country for the EU and its member states.

Václav Baňka
Tomáš Havel
Lucie Leopoldová

Considering the latest developments, it seems that Great Britain and the EU will agree on a transitory period that will run until the end of 2020. However, according to the EU representatives, until all has been settled, nothing is certain.


For this reason, the European Commission has issued a large number of announcements drawing corporate sphere’s attention to the implications that may arise when Britain becomes a third country. One announcement refers to customs and indirect taxes. 


In customs, the following would apply:


  • importation and exportation of goods subject to customs supervision; regular customs formalities including customs declarations; customs authorities’ potential requests for customs debt security deposits
  • regular customs nomenclature including the application of appropriate customs rates
  • Authorised Economic Operator permits and other customs simplification permits issued by the British customs authorities not valid in the EU customs territory
  • goods originating in the United Kingdom that are incorporated in goods exported from the EU to third countries will no longer qualify as "EU content" for the purpose of the EU's Common Commercial Policy.


In indirect taxes, the implications would be as follows:


  • Goods acquired by an EU member state from the United Kingdom or goods shipped from an EU member state to the United Kingdom will be regarded as import and export of goods will all relevant implications. 
  • Persons liable to tax using the mini-one-stop-shop regime will have to register for MOSS in one of the EU member states.
  • Persons liable to tax established in the United Kingdom and purchasing goods or services from EU member states will no longer be allowed to claim a refund of input VAT electronically. But the member states will be allowed to refund the paid tax if Great Britain has entered into an agreement on reciprocity. 
  • EU member states on whose territory entities established in the United Kingdom carry out taxable transactions will be allowed to request the establishment of a tax representative who will be liable for due tax.
  • Suppliers from member states delivering goods liable to excise duty to the United Kingdom will no longer be allowed to use the Excise Movement and Control System (EMCS) in respect of supplies under the conditional exemption from excise duty regime.


For the sake of completeness, in direct taxes, the immediate implications of Brexit would primarily mean the inability to claim reduced taxes on the payment of dividends, royalties and interest in a manner set by the appropriate EU directives. Significant will also be the implications in the area of the free movement of persons, both in terms of various administrative permits and in terms of participation in pension insurance schemes. Even though it is more likely that a transitory period agreement will be concluded, it is quite vital to monitor and prepare for the situation that may occur on the date Great Britain exits the EU, i.e. 29 March 2019. 

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