As a result of the United Kingdom’s decision not to remain in the EU, certain changes have arisen at the tax level and, specifically, for value added tax purposes, which Spanish companies must take into consideration.
The following is a summary of the main aspects that may arise from the departure of the United Kingdom from the EU, regardless of the effective date of the BREXIT.
Operations involving the purchase and sale of goods
With respect to the purchase and sale of goods, it should be noted that all purchases made from UK companies will be treated as imports, which will result in the liquidation of VAT at the time of import (except for the deferred VAT regime, applicable only to entities that submit monthly VAT).
The taxable base for VAT on imports is the Customs Value, adding the following concepts if they are not included in it:
- Taxes, duties, levies and other charges due on imports, except VAT.
- Ancillary costs such as commission, packaging, transport and insurance costs incurred up to the first place of destination of the goods within the Community.
Conversely, the supply of goods delivered within the territory of the United Kingdom will be treated as exports and will be exempt from VAT.
In the case that the Spanish businessman makes supplies of goods to English individuals, the distance selling regime will not be applicable.
On a transitional basis, it is established that, in order to avoid double taxation, intra-Community acquisitions whose transport from the United Kingdom to one of the 27 Member States must be taken into account at the time of delivery, so that if the goods arrive at their destination from the date of withdrawal the operation would be qualified as an import.
Provision of services
The specific rule set out in Article 70 applies. Two VAT Lines, so that the services listed in that article will be subject to Spanish VAT when they are located in the United Kingdom but their actual use or operation takes place in the territory where Spanish VAT applies. An example could be services provided by a tax adviser in Spain relating to the filing of taxes by a permanent establishment in Spain. To the extent that the use of the service has an impact in Spain, the service is deemed to be located in Spanish territory.
Other issues to consider:
The effects explained also have effects on other matters affecting the obligations and on:
- Declarations of Intra-Community transactions: Since transactions carried out between Spain and the United Kingdom are no longer classified as intra-Community, they should not be included in the declaration Form 349.
Spanish companies that carry out transactions with the United Kingdom will also not be required to identify themselves by means of a VAT-ID number.
However, if the United Kingdom eventually withdraws from the EU by agreement and a transitional period is therefore established, during that period companies trading with the United Kingdom will still have to submit the relevant Intrastat declarations, even though for statistical purposes the United Kingdom is considered a third country from the date of departure.
- In the case of customs operations (imports or exports), they will be required to have an EORI number (Economic Operator Registration and Identification number for customs purposes).
- Tax representative: business people established in the United Kingdom who carry out operations subject to VAT in the Peninsula and the Balearic Islands must appoint a representative for the purposes of compliance with the obligations imposed by the Value Added Tax Act 37/1992, unless mutual assistance instruments similar to those established in the Community exist with the United Kingdom.
- Refund of VAT to non-established persons: Businesses established in the United Kingdom who purchase goods and services in the territory where Spanish VAT applies (the Peninsula and the Balearic Islands) must submit their application provided that the applicant has a representative in Spain and that there is reciprocity of treatment in the United Kingdom with respect to Spanish businesses, except in the following cases:
- Templates, moulds and equipment acquired or imported to be used in the manufacture of goods to be exported to the non-established entrepreneur or professional or destroyed.
- Access, hotel, restaurant and transport services linked to attendance at fairs, congresses and exhibitions of a commercial or professional nature held in the territory of application of the tax (mainland and Balearic Islands).
- Goods and services intended for the supply of telecommunications, radio or television broadcasting and electronic services by businesses applying the MOSS
On a transitional basis, until the United Kingdom’s withdrawal is effective, the requirement of reciprocity, the obligation to appoint a representative and certain additional limitations and conditions do not apply. However, the administration may require the applicant to prove his status as a taxable person and to provide invoices.
As can be seen, after the entry into force of BREXIT, all the above-mentioned changes must be taken into consideration for the purposes of analyzing the financial impact of the operations, the possibility of recovering the VAT paid in the United Kingdom, complying with the formal requirements of the standard for the purposes of imports and, in those cases in which it is applicable, modifying the keys that must be reported in the SII (Immediate Information System). It will also be necessary to analyse the impact that may result with respect to tariff costs and import duties.
In this sense, we remain at your disposal to solve any question or doubt that may arise.