After months of negotiations, the European Union and the United Kingdom finally reached an agreement on their future trade relations at the very end of last year. As of January 1, 2021, the United Kingdom will no longer be part of the European Union. This will put an end to the free movement of goods and people, among other things.
The trade and cooperation agreement, which will come into force on January 1, 2021, avoids some of the negative consequences of the UK's exit and also creates a framework for future cooperation between the two. The agreement has many facets, however, in what follows we focus only on the consequences for trade between companies based in the EU (Belgium) and the UK.
1. Impact of Brexit on VAT and customs
Situation until the end of 2020
The UK and the EU were part of the same customs union until the end of 2020, which meant that goods could be traded without any customs obligations since there were no internal borders within the single market. In terms of VAT, supplies of goods to the UK were considered an exempt intra-community supply and receipts were considered taxable intra-community acquisitions.
Situation as of 2021
Since January 1, 2021, this came to an end and goods deliveries between the EU and the UK are considered exports and imports. Consequently, customs formalities and other formalities such as food safety checks must be taken into account. This also means that, in principle, import duties are payable when goods are imported. In terms of VAT, sales to the UK are considered an exempt export, whereby proof of exemption must be provided, among other things, by a valid export document. When importing goods from the UK into Belgium, the VAT must be paid at the time the goods are released for free circulation. To avoid pre-financing of the VAT, it can however be shifted to the declaration provided that a license ET 14000 is held. So don't forget to check if you have made the right changes in your accounting package!
2. Impact of trade agreement: avoiding import duties
Even with the trade agreement in place, trade between the UK and the EU is subject to a lot of (customs) formalities. The preparation of customs declarations and the changed VAT regime are thus a fact. Nevertheless, the payment of the aforementioned import duties can be avoided if the goods are shipped in a foreign country. origin of goods can be demonstrated.
Statement of Origin
One of the most important consequences of the trade agreement is the fact that the EU and the UK have decided to apply zero tariffs on imports and not to apply import quotas for the majority of goods. In concrete terms, this means that no import duties will be payable if goods are imported into the EU from the UK and vice versa. Importantly, however, this exemption does not apply automatically and is subject to conditions.
In order to take advantage of the zero rate or another advantageous rate, the importer must be able to prove that the goods originated in the EU or the UK. This can be done in two ways:
- A declaration by the supplier that the goods were obtained, produced or reworked in the EU or UK and attached to the invoice. When the value of the goods exceeds €6,000 or £5,700, the EU supplier should also attach a statement of origin to the customs declaration obtained via the REX system. For this purpose, the (Belgian) supplier needs to apply for a REX number from the (Belgian) customs. The UK will introduce a similar system.
- Alternatively, the importer may provide its own evidence based on documentary evidence obtained from its supplier or the manufacturer of the goods. In that case, the importer bears full responsibility for the correct application of the rules of origin instead of the supplier-exporter.
For supplies with a combined value of less than €500, no declaration of origin needs to be given.
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