The United Kingdom left the European Union at midnight on December 31, 2020, following the withdrawal agreement signed in early January of that year. Since the beginning of 2021, trade between this country and the members of the European Union has therefore been conducted according to new rules. We take a look at theimpact of BREXIT on customs and VAT, point by point. Find out about the consequences in terms of VAT and the DES or DEB declaration, as well as how imports and exports work. Finally, you'll learn about the customs procedures, declarations and duties to be paid.
BREXIT: impact on VAT for businesses in Europe
BREXIT implies the exit of the United Kingdom (including Northern Ireland) from the European Union. This means the end of free trade between the UK and the European customs union. Economic flows between a British company and a French company now correspond to transactions with a non-EU state.
Qualification of transactions between the UK and EU member states
This notion of trade with a third country means that all flows of goods or services fall into the category of imports and exports. As a result, the traditional VAT arrangements for these transactions apply. We are no longer talking about intra-Community VAT between the UK and the EU.
Impact of BREXIT on VAT, DEB and DES declarations
European companies exporting goods to British customers are carrying out an export operation. This operation is therefore exempt from VAT. In the case of supplies of services, companies no longer draw up a DES (declaration of exchange of services) for these supplies of services to UK companies. This is a purely intra-Community obligation. The same applies to the declaration of exchange of goods (DEB). When importing products from the UK into France, the import VAT system applies.
VAT on imports between the UK and European countries
Let's take a closer look at the two types of transaction, import and export, between the UK and France or another EU member state.
Importing goods into the European Union from the United Kingdom
In accordance with Articles 292 and 1695 of the General Tax Code, import VAT is due. Since the beginning of 2022, the Direction générale des finances publiques (DGFIP), rather than customs, has been responsible for managing and collecting this tax. As a result, import VAT must now appear on the importing company's VAT return. Note that this declaration is pre-filled with the customs clearance data previously declared to customs, but that errors are possible, and you remain responsible for the accuracy of your VAT declarations.
UK imports of goods from a Member State
For a French company, the supply of products to a British customer is now considered an export. In this case, the VAT return shows the tax-free sale on the export line. No VAT is due to the French government. On the other hand, for the UK customer, UK import VAT will apply.
Impact of BREXIT on customs operations and duties
Transactions between the UK and a member of the European Union such as France constitute imports and exports for customs purposes. As such, they are governed by conventional law, with the exception of the arrangements set out in the December 24, 2020 agreement.
Agreement of December 24, 2020 between the United Kingdom and the European Union
This trade and cooperation agreement, signed at the end of 2020, provides for duty-free trade between the United Kingdom and the European Union. However, this duty exemption is subject to certain conditions. The agreement applies from January 1, 2021. These fiscal provisions do not, however, imply the absence of customs declarations and formalities.
Exemption from customs duties conditional on preferential origin of products
Exemption from customs duties applies to goods that comply with the rules defined in the agreement, known as "preferential origin". This means that the products must originate in the country of export. This concept is the subject of a detailed DGDDI data sheet. This exemption is not systematic. It must be requested at the time of customs declaration. It also requires that the preferential origin be justified and justifiable in accordance with the terms of the Agreement.
Not always anticipated, tracked or archived, these justifications and proofs of origin are at the heart of controlled post BREXIT management for your company.
Tariffs between the UK and the EU: impact of BREXIT
There are 4 possible scenarios for importing products from the UK into France or an EU member state:
- The goods are already exempt from customs duties under the Common External Tariff of the United Kingdom or the European Union. So the importing company does not need to apply for preferential origin relief.
- Customs duties on the products are zero according to the Common External Tariff. So the importing company does not need to apply for preferential origin exemption.
- Products are subject to customs duties according to the common external tariff. This tariff is not zero. Goods are eligible for preferential origin exemption. The company thus organizes itself in such a way as to be able to justify preferential origin upstream, and then at any time during the 6-year period, and thus claim preferential origin on its customs declaration.
- The company cannot benefit from the exemption linked to preferential origin, and the common external tariff makes the purchase of these products subject to customs duties. It must pay customs duties.
Import and export: company customs declarations
As operations take place between a non-EU country and an EU member state, customs declarations are now required for cross-Channel flows, for both imports and exports. In addition, ICS safety and security formalities are now compulsory. An Entry Summary Declaration (ENS) is now required before products imported from the UK arrive in the European Union.
Compulsory EORI number for European companies
The United Kingdom is now a third country with regard to the European Union. This means that any French company wishing to trade with the UK must have a European EORI number. This is the Community's unique identification number. This applies to both imports and exports.
The impact of BREXIT means that the UK, including Northern Ireland, is now a third country under EU VAT, customs and excise law. With the exception of the provisions of the agreement that allow certain products to be exempt from customs duties, companies manage their trade as they would for any import or export.
Fiscalead's international supply chain specialists will be happy to help you analyze your flows with a British company.