Latest EU – BREXIT VAT News
You could find summarized developments in the EU VAT landscape by email and on our website.
Ratification Extension Confirmation
On 24 December 2020, an agreement in principle was reached between the EU and the UK on the text of a new “Trade and Cooperation Agreement”, with a view to its provisional application from 1 January 2021.The UK government has accepted a proposal from the European Commission to extend the final date for the EU-UK Trade and Cooperation Agreement (TCA) to operate on a provisional basis from 28 February 2021 to 30 April 2021.
Although not directly connected, we understand that many member states are awaiting for the ratification of the TCA and/or a decision on its equivalence with the Mutual Agreement for the Recovery of Debts (MARD) before setting out their policy of Fiscal Representation requirements for GB established businesses, therefore, uncertainty in this regard is likely to continue until the EU achieves substantive progress on ratification and equivalence.
As the Brexit trade deal contains a Protocol on Mutual Assistance in VAT matters between the UK and the EU, the Cyprus Tax Authorities through the recently published “Εφαρμοστική Οδηγία 10/2021” allows UK businesses to continue to trade in Cyprus without a fiscal representative, while Greece and Hungary are deactivating and canceling VAT registrations of UK businesses without fiscal representation; just one example of the divergent approaches of the EU tax authorities in respect of this one issue.
Increased Scrutiny of UK Businesses
In light of continued uncertainty, we have seen an increase in individual tax authorities scrutinising the activities of UK businesses.
We recommend that all UK businesses regularise their position in respect of VAT reporting in Cyprus as soon as possible to mitigate risks arising from further analysis by the tax authorities. Please also be aware that our interactions with tax authorities on behalf of UK companies can become more complex and time-consuming than before, even for relatively straightforward procedures.
Changing Mechanisms for the Recovery of Foreign VAT
UK companies wishing to recover VAT incurred in Cyprus without holding a local VAT registration must now follow the same processes and procedures as other businesses established outside the EU. Any claims for VAT incurred in 2020 (which can still be lodged under the Refund Directive) must be lodged via HMRC’s portal for transmission to Cyprus by 31 March 2021 at the latest. For VAT incurred after 1 January 2021, a Thirteenth Directive claim must be submitted.
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