With the end of 2020 period in Brexit that ends on 31 December 2020. Apparently, there will be a lot of changes in how VAT treatment is done for international goods and services. The entire process of VAT will become cumbersome and manual as all the applications are paper-based. These will be sent to individual member states related to VAT. Cross border VAT is one thing everyone is so concerned about. Let’s dig into more details you might be interested in.
UK exited EU VAT regime, custom union, and single market from 1st January 2021. This means the compliance specifications are completely different. This also makes sure all the customs declarations, goods regulations, services, and import VAT are different. So what were the important points of the cooperation agreement deal and Cross Border VAT? Let’s find out:
Know More About Cross Border VAT Changes
Here’s a major list of changes for UK and EU businesses.
- EU is completely separate from UK as of now. So the VAT directives for the EU are completely different. For Example, there’s no longer an obligation to maintain a minimum VAT rate of 15% When you say that the VAT rate is already 20% and consumption tax accounts for almost a third of tax revenues, there are likely no chances of reduction.
- UK is seen to have complete control of its reduced VAT rates. These are currently restricted due to the EU VAT directive. However, there’s a conflict between the two countries over the subject matter. EU believes that it needs to have full power for setting the rates.
- All movements are now imports or exports subject to UK and EU import VAT. Businesses need to have two EORI numbers to move their goods between UK and EU.
- By way of compensation, UK introduced a postponed VAT accounting import deferral scheme. This makes sure no cash payments are made by business importers to UK customs. But many UK businesses do not offer the same compensation for other EU countries that are importing their goods.
- There’s a loss of distance selling thresholds for UK e-commerce sellers of goods and EU sellers. These are completely subject to UK or EU VAT imports. Please note that the EU e-commerce sellers need to register for UK if the purchase takes place under £70,000 threshold.
- If you’re a UK business with foreign VAT registration in EU, you’ve got to make sure that you appoint a special VAT fiscal representative. This is highly applicable in 19 out of 27 EU states. All these agents hold liability for any unpaid VAT.
We hope you’ve found all the information useful. All these cross border VAT directories for the UK apply specifically for the year 2021.