Importing European Made Product Back Again Into Europe

This document was updated on xiv January 2021.

The United Kingdom (UK) left the European Marriage's (EU) unmarried market on i Jan 2021. The Trade and Cooperation Agreement (TCA) was agreed on 24 December but many detailed aspects of Brexit remain unclear. However, from that date, the Uk becomes equally far as the Eu is concerned a 'third land'. Businesses have go importers and exporters betwixt the EU and the Britain and they need to take urgent action to minimise the disruption to their business concern.

Accountants are instrumental in helping their clients make the necessary plans, so it is important that accountancy bodies brand their members aware of the key changes in the way trade will accept place, to better advise their clients.

This Q&A provides practical information on the main changes known at mid-January 2021. It is not a comprehensive document.

Eu-UK trade changed significantly from 1 Jan 2021, and volition alter once again for e-commerce from 1 July 2021. Businesses should take the following main actions:

• speak to their logistics providers / customs agents
• speak with their suppliers and customers about the changes
• get familiar with customs requirements and allocate their goods
• apply for a GB / EU EORI Numbers and VAT registrations where applicative
• be clear on the rules of origin contained in the TCA between the EU and United kingdom of great britain and northern ireland and the administrative processes for claiming preferential tariffs
• consider the implications of the Eastward-Commerce changes
• remember EU VAT refunds – 31 March 2021

Accountants with clients who engage in merchandise between the EU and the United kingdom, and vice versa, should further research the technicalities and are strongly advised to contact their relevant clients as soon equally possible to discuss their specific circumstances. Unrepresented businesses are strongly advised to take specialist communication to ensure the continuity of their business organization.

We have also highlighted some of the changes that could occur as a issue of Brexit in respect of other taxes. The impacts of these oft depend on the provisions of double tax treaties betwixt the United kingdom and individual EU Member States and specialist advice should be sought. Brexit & directly taxes is bachelor on this page.

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Question 1: A merchandise deal between the UK and the Eu has been agreed and adopted before 1 Jan 2021. No tariffs are charged on the supply of non-excise goods. Surely, I have nothing to worry about?

Answer : Admittedly non! The TCA has removed the possibility of full general quotas and other restrictions on the importation of goods. It has likewise prohibited tariffs on some imports between the UK and the European union – but only in certain circumstances and with the correct documentation.

The TCA covers very piffling in the way of the provision of services betwixt the European union and the United kingdom, apart from some basic principles and a commitment to farther examine cooperation in this area. Substantial uncertainties remain in areas ranging from the ability of fiscal services providers to provide their services in the other political party's territory(ies), to the mutual recognition of qualifications and regulatory standards.

In respect of accounting for VAT, and the requirements for customs clearance of goods, there are significant changes – the details of virtually of which are already known.

Businesses must urgently review their processes to be sure that they are prepare for the changes that took effect on 1 January 2021. Failure to provide the correct paperwork is likely to result in shipments being delayed at borders, and possible fines (for example, for failing to obtain a Kent Admission Permit).

Question 2: Does it make any difference if I am a UK business organization selling into the Eu or an European union business selling into the Britain?

Respond: Not really. The changes are broadly equivalent on both the Eu and UK sides. The master difference is that there is more than certainty in respect of the procedures (and custom tariff rates) in the Eu because these are already fully established. However, at that place is meaning variation in procedures and rates of VAT across the 27 Member States, so Uk exporters importing into the European union volition, depending on their terms of trade,  need to acquaint themselves with the local rules of each Member Land into which they make supplies.

Also, at that place is currently a critical distinction in respect of supplies of goods fabricated between Northern Republic of ireland and the EU (and vice versa) and the residual of the UK (for the purpose of this certificate, subsequently referred to as 'Great United kingdom of great britain and northern ireland' – GB). We will look at this effect in more detail below.

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Supplies of Goods – VAT

Question 3: I sell goods between the EU and GB. What changed for me from the 1 January?

Answer: Such supplies ceased to be intra-EU supplies. Consequently, they are treated every bit exports from the country of acceleration and imports in the country of inflow. This has of import implications for VAT, customs and excise duties. It also impacts on other regulatory requirements that will take to be met for goods, such as those field of study to wellness checks (for nutrient, medicines, live animals, etc), chemicals, medicines, weapons, and dual-purpose goods.

The goods leaving the country are treated as exports. This means that they are exempt\nil rated from VAT – then no output VAT will be charged on the supply of goods. You lot must, however, be able to provide proof that the appurtenances have left the Eu, or GB for exports to the European union.

Unlike rules apply to Northern Republic of ireland – EU supplies of goods and to Northern Ireland – GB supply of goods (Come across below).

The goods entering GB for supplies to the EU and for supplies from the Eu to the UK are treated as an import. VAT volition have to exist charged at the local charge per unit of VAT of the state of import for that type of adept. A searchable 'Taxes in Europe' database has been developed for EU Member States, which shows Member States' VAT rates for specified appurtenances.

Question 4: Who accounts for and pays the VAT?

Answer: That depends on the terms of business, who is identified as the importer and who receives the goods.

General guidance is bachelor here (in respect of where to taxation) and here (in respect of who is liable to pay the tax).

If your organisation imports for your its own use – in manufacturing or for resale for example – and then you are liable to annals for VAT in the country important and account for the import VAT under the local VAT reporting requirements.

If you make distance sale of goods, the situation is more complex.

If y'all brand B2B supplies, so your customer would normally exist expected to account for the VAT on import, which would be charged by customs at the point of import.

If yous make B2C supplies  of goods, you have the selection as to whether your business terms provide that yous will deal with the customs duty and import VAT yourself ('Delivered Duty Paid – DDP') and thereby price the goods to include these costs. With DDP, you would be required to register and pay the VAT in the country of the customer- and\or use an amanuensis.

Alternatively, you could opt for 'Delivered at Place' (DAP) – where only the net price and commitment costs would be shown, and the customer would be liable to pay the VAT and community duty. This would typically be nerveless past the courier or national postal service and goods would be withheld until payment is received. It is possible that in some Member States the national post will pay the import VAT and reinvoice the supplier.

The rules are complicated and specialist advice should be sought.

Question 5: You mentioned distance sales. I idea I only had to register in other countries if I made a lot of sales there?

Respond: The national exemption thresholds for altitude sales of goods only encompass sales between two Member States to not-VAT identified customers in the second Eu Member Land. Therefore, from one January 2022 this simplification regime does not utilize for EU-GB sales and GB-European union sales.

You must and so choose whether to utilise the DAP or the DDP terms described in Question iv. If they chose DAP and then the VAT would commonly be paid at the point of import by the customs declarant (e.g. the courier, postal operator or by a customs agent) and then recovered from the customer before the goods are handed over.

If the DDP method is chosen, an EU supplier must register with HM Acquirement and Community and declare and pay VAT for distance supplies made to the UK. Simplification procedures will be available for small value consignments (see Question half dozen below).

GB suppliers making distance sale of goods under DDP into the Eu volition normally be required to register for VAT in each Member State into which they make supplies of goods originating exterior the EU. Currently, at that place is no exemption threshold for non-Eu established businesses and EU Member State local registration and reporting requirements differ greatly. For instance, many European union Fellow member States crave that 3^rd country suppliers (i.due east. non-EU registered businesses) formally appoint a tax representative that will have joint and severable liability for any unpaid VAT. One example of this is France, equally shown in this article.

Question 6: Just I just sell minor items through a sales platform. Surely, I don't have to worry about this?

Answer: Unfortunately, you practise. In that location are large changes in both the United kingdom of great britain and northern ireland and the Eu in 2022 in respect of altitude selling to consumers of low value items. The changes are like, but the timing is non – the changes practical in the United kingdom of great britain and northern ireland from 1 January 2022 and will apply from 1 July 2022 in the EU.

EU to UK altitude selling

On i January 2022 the UK'southward depression value consignments exemption for appurtenances not exceeding £15 in value was withdrawn. This volition brand all imports subject to import VAT (and potentially customs duties). At the same time, a small consignment import simplification procedure is in place and online marketplaces (OMPs) must account for VAT on behalf of suppliers that use their platforms.

A simplification is available from i January 2022 for low value consignments where the total value of the appurtenances (not the private value of each particular) does not exceed £135, excluding shipping costs and duty. EU suppliers must register with HM Acquirement and Customs and charge VAT at UK rates at the point of sale then account for the VAT using normal VAT return procedures. The goods will so non exist delayed by the requirement for VAT to be charged by customs at the betoken of entry.

If such goods are sold via an OMP, it is the OMP that would business relationship for VAT at the point of auction.

The options for eastward-commerce sellers from GB to the European union, and how the irresolute roles that the OMPs will play in this, are shown in the graphic below:

Source: ICAEW

This is a circuitous area and specialist advice should be sought as soon as possible.

GB to EU distance selling

Very like measures volition be introduced in the Eu but have been postponed until 1 July to allow for delays caused by the Coronavirus crunch.

This means that where Member States have adopted this option, the EU'southward €22 exemption will be maintained until 1 July 2022 (note that not all Member States take adopted the maximum threshold, which is, for instance €1 in France €17.05 in Republic of cyprus, DK80 in Kingdom of denmark and €cipher in Sweden).

All the same, all other distance sales of appurtenances from GB into the EU will be field of study to import VAT from i January in the Member State where the good are imported into. Consequently, GB suppliers will have to register and account for VAT in each Fellow member State where they brand distance supplies. The different ways with which due east-commerce imports into European union Member States are accounted for, for VAT purposes, between one January and xxx June 2022 are shown below.

Source; ICAEW

From ane July 2022 the simplified procedures for depression value consignments come into effect in the EU for consignments with a total value of up no more €150. These mirror the simplifications that the Uk  introduced on ane Jan 2021, with the of import improver of the ability in the European union to employ the import 1 Finish Shop (IOSS).

From this date GB businesses can choose a single Eu Member State of Identification and and then use the IOSS to make a single return of all small value consignment distance supplies of to each Member State.

Additionally, the Eu'south rules on the distance sales facilitated through an online platform will come into effect on 1 July. However, in the intervening menstruation, y'all may not be able to rely on your digitalised sales platforms to bargain with the necessary formalities. Indeed, Amazon take already confirmed that they will non allow cross-channel sales from Fulfilment By Amazon (FBA). Cross-channel traders will be required to transfer appurtenances to a fulfilment centre in the Britain or EU equally relevant – which after 1 January 2022 has VAT and customs duty consequences for the supplier. The options for e-commerce sellers from GB to the Eu, and how the changing roles that the OMPs volition play in this, are shown in the graphic beneath:

Source: ICAEW

Again, this is a very complex subject and skilful advice should be sought to bargain with your individual circumstances.

Question seven: You can't always assume that customers will receive their goods by the expected date. What happens if goods were in transit on 1 January 2020?

Answer: Any Eu-UK supplies fabricated on or before 31 December will be treated as intra-EU supplies until 31 March 2021. Consequently, they volition follow the current intra-EU supplies VAT and duty treatment. Even so, it is possible that some goods may exist stopped at Customs until the supplier is able to demonstrate that the despatch of the appurtenances took place earlier ane January 2021.

Question viii:  I'thousand lucky. I only sell digital services and we already have the Mini-One-Stop Shop (MOSS). Surely, cipher changes for me?

Answer: Yes, it does. If you are a Great britain established supplier of digital services selling to non-VAT registered customers in the EU you volition even so be able to employ the Mini-I-Stop Shop to make your return filing.

However, from one January 2022 the £8 818 (€10 000) threshold  disappeared for supplies of digital services between the Britain and European union non-VAT registered customers. United kingdom of great britain and northern ireland suppliers must register in a single EU Member Country and use the Mini I-Stop Shop (or else register in every European union Member State where the clients are established) for digital services to declare all of the EU sales, and the VAT thereon.

For EU businesses selling digital services into both UK and the Eu, yous will be able to utilize the MOSS for European union supplies but for United kingdom supplies you must annals in the UK and declare your sales to HMRC – yous can no longer use the MOSS for these supplies from 1 Jan 2021.

Question 9: I take a complex supply chain that involves movements of goods betwixt the U.k. and European union. Is in that location anything else I should be concerned nigh?

Answer: Virtually certainly, but the bear on will depend on your business organisation model and the nature and calibration of your cross-border supplies.

In the short-term at least, European union and UK VAT legislation volition remain reasonably aligned (although Member State options already mean that there are considerable differences between Fellow member States local VAT rules) but may well diverge in the future (east.g. in respect of financial services). However, even before the rules diverge further there volition be practical problems to deal with – especially in respect of admission to EU systems and to simplifications directly related to intra-Eu supplies of goods. Equally an indication, nosotros can consider the Quick Fixes that came into effect from the 1 January 2020.

Not-established suppliers will be able to apply the phone call-off stock simplification after Brexit, as tin can be seen from this Explanatory Note from the European Commission, department 2.5.25. However, in respect of chain transactions, section three.6.ii, this simplification will just apply to intra-Eu movements of goods so movements of goods from 3rd countries must make use of other simplifications, if available (or else be VAT registered in an EU Member Country).

Question 10: If I incur input VAT in respect of EU-GB supplies but am non required, and accept not chosen to, register in the land where the VAT was incurred, volition I still be able to recover it later on 31 December.

Answer:  Yeah. However, for supplies made subsequently 31 December the claim for refund must be made directly to the regime of the country concerned, providing that in that location is a reciprocity understanding. Such claims cannot and so be made through the electronic refund claim system.

The one exception to this rule being in respect of goods or services supplied upwardly to 31 December 2020. In such cases the electronic system can be used by all UK and Eu businesses until 31 March 2022 to recover the VAT incurred in 2020.

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Supplies of Goods – Customs Duties/Tariffs

Question 11: I have not had to worry about import duty for Eu-GB transactions before. What is going to be the impact on me?

Answer: The TCA introduced a prohibition on the imposition of tariffs on the supply of goods originating in either the EU or UK and supplied into the territory to the other party. However, the 'preferential tariff treatment' is not automatic and must be claimed – either at the time of importation via the customs import documentation or, by derogation, retrospectively for up to three years after the date of importation.

The origin of the product is critical in determining whether the preferential tariff treatment volition apply. The full general principles will be considered in further detail under the Import Tariffs section below.

Urgent Action

Cross-channel suppliers must take some urgent administrative steps:

1. Suppliers must be sure that they have an Economic Operator Registration Identification (EORI) number otherwise they volition not be able to articulate goods at customs. In certain circumstances, they may demand both a Britain and an EU EORI number.
2. They should acquaint themselves with the relevant go out and entrance community documentation for supplies fabricated after 31 December – otherwise it volition not be possible to export the goods or, goods may become stuck in customs at the point of import. Some points of departure volition require pre-lodgement of customs declarations before movement of goods takes identify, then certification may have to exist lodged in accelerate of the 31 December borderline.
3. Suppliers need to choose the correct standardised article identification (customs) code for all of their products. Getting this wrong could result in the wrong tariff beingness applied or the appurtenances beingness blocked past customs.
4. Suppliers should also review their commercial terms (e.k. Incoterms) to determine whether they or their customers will be responsible for paying the community duties.
5. Suppliers should comprehensively review their supply chain and or production procedure to determine the origin of the goods that they supply. In the instance of manufacturers, this could be a very complex process as each component of the finished good must be considered to determine whether the products' origins are from the EU\United kingdom of great britain and northern ireland or from another third country
6. Where suppliers source goods or components outside of the EU\Uk, systems must be put in identify to segregate these from items originating from the Eu\UK either physically or by means of accounting procedures.

Import tariffs

As mentioned, for the supply of goods originating in the EU or the United kingdom of great britain and northern ireland to the territories of the other political party, there is the possibility of a preferential tariff treatment (zero tariffs). Import tariffs will apply on the WTO most favoured nation basis if:

• the products practise not originate from either the UK or Eu
• the supplier is unable to verify the origin of the products
• the supplier chooses not to apply for the preferential tariff treatment

The UK practical its own import tariffs from i January 2021, which are not the same equally EU tariffs. The United kingdom of great britain and northern ireland tariffs can be institute here. The UK Global Import Tariff substantially reduces the overall duty payable on imports compared to the current EU Tariff Gratuitous Lines (i.e. UK 47%, European union 27%; Average Duty rate Great britain 5.seven%, Eu 7.two%).

From 1 January 2021, importers of non-controlled goods into the UK are subject area to basic community requirements and tin filibuster their supplementary customs declarations until July 2021. They can too defer submitting confirmation of the goods' origin to claim the preferential tariff treatment until this date. For importers using this delayed filing, the payment of duties and VAT can be delayed to the fourth dimension when the supplementary declaration is submitted. Full community procedures are required from 1 January 2022 in respect of controlled goods – eastward.g. alcohol and tobacco products.

From ane January 2021, goods brought into the European union from the UK are subject to full community procedures. This means customs formalities will have to exist observed at importation of the outset EU land at which the goods arrive.

Duty suspension will no longer automatically be available – excise duties and VAT are due at the point of importation. Documents required to establish the origin of the goods will be required at the point of importation if the supplier wishes to claim the preferential tariff treatment immediately.

From one Jan 2022 UK economical operators can no longer use the EU's Excise Movement and Control System (EMCS) for imports of controlled goods into the European union from Slap-up Britain.

Rules of Origin for the supply of goods

Correct understanding and implementation of these rules is essential if the preferential tariff handling is to be successfully claimed. The rules are strict and complicated and crave supporting documentation to be maintained.

Fundamentally, to benefit nether the TCA goods must meet the EU-Great britain preferential rules of origin. Generally, these will utilise when the goods have been:

• 'wholly obtained' from within the territory of the EU or United kingdom of great britain and northern ireland without using materials from any other country – such as crops grown in one territory or the manufacture of an item in a territory using materials totally sourced from that territory
• 'substantially transformed' in line with the relevant Production Specific Rule. Depending on the product, this could exist based on the amount of value added, whether the process leads to a alter of tariff category or specific manufacture from certain products or through specified processes

'Substantially transformed' requires a considerable chemical element of operation on the production. At that place is a list in Article ORIG.7 of processes that are insufficient to exist deemed equally substantial transformation. These include labelling and unproblematic packaging, simple mixing of products, simple assembly of parts etc. In this context, 'simple' means that neither specialist equipment nor skills are required for the operation.

Within the Product Specific Rules there are specific tolerances that permit some non-originating elements in determining local origin for the concluding product. For certain products this is based on weight (i.e. under xv% non-originating material) or by value (i.e. under 10% of value added can come from non-originating products), with amendments to these rules for textiles.

One time a production has gained originating status, for example by substantial transformation in accordance with the relevant Product Specific Dominion, it would henceforth be considered as fully originating and the non-originating element overlooked.

Suppliers are required to segregate good, physically or by accounting procedures, products that originate from their territory from those that practice non.

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Northern Ireland

Question 12: I move goods between the Eu and Northern Ireland and, sometimes, on to Great Britain. What volition change for me?

Answer: Under the Withdrawal Understanding, Northern Republic of ireland remains part of the European union Unmarried Market until at least 31 December 2024, with the possibility for the Northern Ireland Assembly to extend this menstruum.

Consequently, supplies of goods (not services) betwixt Northern Ireland and the European union Member States from the 1 January 2022 keep as intra-European union supplies, with economical operators having to utilize the EMCS and SEED systems for all movements, and the European union online refund mechanism all the same being bachelor. Equally, electric current reporting requirements such as Intrastat and Eu Sales Lists (ESL) proceed.

Movements of appurtenances from Northern Ireland to Great Great britain and vice versa are treated as exports and imports respectively. Consequently, the impacts volition be the aforementioned as those discussed previously for movements of appurtenances directly between Corking U.k. and the Eu Member States, including the rules of origin.

The latest HM Authorities communication for moving goods under the Northern Ireland protocol can be found here.

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Supply of services

Question 13: I supply services between the United kingdom of great britain and northern ireland and the EU. How will this bear upon me?

Answer:Costless trade agreements concentrate on supplies of appurtenances, rather than services (albeit in that location is the WTO General Agreement on Merchandise in Services (GATS)). Consequently, at that place are  meaning changes in how supplies of services cantankerous-aqueduct are accounted for VAT purposes.

The TCA contains provisions in respect of the common recognition of lawyer qualifications (when performing certain services) but otherwise contains no understanding on the mutual recognition of professional qualifications. Without this, it may not be legal for a service provider in a regulated profession (i.e. medical, accountancy, architectural) to provide cross-channel services – and this tin depend on the national rules of the specific country where the services are to exist conducted.

The degree to which you may be affected tin be gauged by using the European Committee's  regulated professions database.

For non-regulated professions, there are provisions to ensure a liberalised market for services provided from the Eu to the UK, and vice versa. Visa-free business trips are permitted of up to 90 days in whatsoever 180-solar day menstruation.

Question xiv: OK. I am not practicing in a regulated profession. How will the rules change for me after 1 January?

Answer:The current EU VAT legislation  is already quite complex in respect of the decision of place of supply of services, which tin can depend on factors, such every bit the nature of the service, whether the recipient of the service is a taxable person, where the service is performed etc.

Where the current rules bespeak that the service is 'supplied' in another country, the supply will be discipline to VAT in that state. Consequently, if, for example, the place of supply is deemed to exist in a Fellow member State for services provided past a taxable person based in the Great britain, it would exist an outside the scope of VAT supply in the UK (null-rating) and taxable in the Member State where the place of supply of the service is located.

The reverse would apply for an EU taxable person making supplies of services where the place of supply was the UK.

B2B supplies of services are situated where the customer is established. As a rule, the client volition be liable for the payment due of VAT in the country where they are established. There are, nevertheless, exceptions to this dominion.

B2C supplies of services are mostly situated where the supplier is established so consequently a VAT liability will be incurred in the state where the supplier is established.

However, the place of supply rules for services are complex and expert communication should be taken.

As with the supply of goods, there volition be many specific circumstances where the finish of the transitional period could result in uncertainties and issues for specific concern models.

For instance, Art 59a of the VAT Directive permits Member States to override the normal place of supply rules if the constructive use and enjoyment of these services takes place outside the Eu despite being performed in their Member State, and vice versa. This is a measure to prevent double taxation, or non-tax, and is ofttimes used by Fellow member States to tax services that would otherwise be out of telescopic of VAT. If EU Member States were to utilize this to certain supplies made past suppliers established in the UK, or vice versa, there could be bug in respect of recovering VAT already paid – thereby leading to double tax and the question of how this double taxation could exist recovered.

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Next steps

Question 15: What should I exercise adjacent?

Answer: If y'all brand European union-UK supplies or take a supply concatenation that relies on EU-UK deliveries, y'all should immediately assess the risks to your business concern and brand the necessary registrations. A useful checklist tin exist establish here.

With the belatedly agreement of the TCA there will still be many businesses that haven't prepared for the changes and at that place volition be farther pressure to effect VAT and customs registrations and obtain tax advice. If you get out it too late you may detect that you lot are unable to obtain the necessary authorisations and registrations for some time, leading to additional business disruption.

Specialised businesses (for instance, those requiring licenses or those with complex supply chains) should accept expert advice as soon as possible. This is especially the example for the complex rules on origin, which may crave businesses to brand structural changes equally to where they source, distribute or even manufacture goods in order to deal with the bug.

Getting this wrong, or doing naught, could exist very costly. For example, hauliers are already refusing to collect goods from some businesses who may non have implemented the necessary processes – as one bundle without the correct documentation tin prevent the entire assignment clearing customs.

In the longer term, it will be necessary to monitor the legislative developments in both the EU and the United kingdom of great britain and northern ireland to identify new divergencies between the two VAT systems and the applied issues that these may cause.

By virtue of the UK's Tax (Cross-border Trade) Deed 2018, on 1 January 2022 the Uk's VAT rules effectively remained largely aligned with those of the Eu, to avoid whatsoever cliff edge effect on that date. At the same time, this Act adapts UK police force to remove, for example, in relation to Great Britain, the concepts of intra-EU acquisitions of goods as they become imports from 1 January 2021.

Over fourth dimension though, we could come across difference in areas such as the VAT treatment of financial services (the UK authorities recently appear that United kingdom financial services businesses volition exist able to recover input VAT in respect of supplies fabricated to the European union), VAT groups, and fractional exemption, for example.

Currently there is no clear indication of what such changes will be, or when they will occur.

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Source: https://www.accountancyeurope.eu/publications/vat-customs-duty-and-brexit-prepare-now/

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