VAT & Brexit

Are We Going Back 27 Years on January 1, 2021? Will There Be a Physical Border Again Between the United Kingdom (UK) and the EU Member States?

It certainly looks that way. Without a Brexit deal between the UK and the EU, customs formalities will once again apply to transactions with the UK in just over two months, and import VAT will be due on goods shipped from the UK to the Netherlands.The UK officially left the European Union (EU) on January 31, 2020. A transition period began on February 1, 2020, lasting until December 31, 2020, during which the EU and UK have been negotiating a new cooperation agreement for implementation on January 1, 2021.

Nevertheless, companies are advised to prepare for a hard Brexit—a Brexit without further agreements, which will result in the reestablishment of physical borders. From a VAT perspective, this means that deliveries of goods to the UK will no longer qualify as intra-community supplies, but as export supplies. While both are subject to a 0% VAT rate, they must be reported under different sections of the VAT return. Goods purchased from the UK will first need to be imported via customs before being delivered to Dutch businesses.

In any case, Brexit means that Dutch businesses trading with the UK will face changes in VAT obligations, and specific action will be required.

Import and Export

Adjust Tax Codes in Your ERP System

Currently, goods delivered to customers in the UK (B2B) qualify as intra-community supplies at 0% VAT, and are reported in section 3b of the VAT return. After Brexit, the UK will be treated as a third country, like Switzerland or Norway. As such, the supply of goods to UK customers will become export supplies taxed at 0%, but must now be reported in section 3a of the VAT return. Update the tax codes in your ERP or accounting system to ensure that UK deliveries are reported in the correct section of your return.

Intrastat and EC Sales List (Opgaaf ICP)

From January 1, 2021, sales to the UK should no longer be reported in Intrastat declarations or the EC Sales List (Opgaaf ICP). Instead, an export declaration with Customs must be filed.

Article 23 License

Many companies importing goods from the UK have received letters from the Dutch Tax Authorities about applying for an Article 23 license. This license allows import VAT to be reported in the VAT return instead of being paid upfront at Customs, improving liquidity by allowing simultaneous deduction of the import VAT.

EORI Number

Dutch companies need an EORI number to import goods from outside the EU. Check if you already have one. If not, apply for one as soon as possible via the Dutch Customs Office.

Simplified Schemes No Longer Apply

UK VAT Refund Requests

We advise requesting VAT refunds for UK VAT paid in 2020 via the Dutch Tax Authorities’ portal before January 1, 2021, to avoid having to claim directly from the UK authorities later, potentially via a fiscal representative.

Simplified ABC Transactions

In the event of a hard Brexit, the simplified ABC scheme will no longer apply, possibly requiring VAT registrations in other Member States or the UK.

Consignment and Call-Off Stock Simplifications

Simplified rules for consignment stock and call-off stock will no longer apply. If a Dutch supplier holds stock in the UK with a consignee or buyer, the Dutch seller typically does not currently need a UK VAT registration—but will need one post-Brexit if the goods remain in the UK.

Sales to Consumers

End of Distance Selling Scheme

Goods sold from the Netherlands to UK consumers currently fall under the distance selling rules—but this will no longer apply. These transactions will become exports taxed at 0% Dutch VAT. For goods under GBP 135, an online UK VAT portal may be introduced. For goods worth GBP 135 or more, the UK recipient will be charged UK VAT.

Electronic Services

Sales of electronic services to UK consumers are subject to UK VAT. Currently, this can be reported via the OSS (One Stop Shop) system with the Dutch Tax Authorities. This OSS scheme will no longer apply to the UK. After Brexit, you will need to register for VAT in the UK and file your returns there.

International Services

Update ERP Tax Codes

If a Dutch service provider performs a service for a UK business customer (B2B), it is currently taxed in the UK and subject to the reverse charge mechanism. The invoice should state "Services Reverse Charged" and include no Dutch VAT, with reporting in section 3b of the Dutch VAT return.
After Brexit, the service is still taxed in the UK, but depending on UK VAT law, the customer will need to apply the reverse charge. The Dutch provider will no longer report this service in the Dutch VAT return or EC Sales List.

Update your ERP/accounting system tax codes so that services provided to UK customers from 2021 onwards are excluded from the Dutch VAT return and EC Sales List.

VAT Deduction on Exempt Services to UK Clients

After Brexit, Dutch businesses can deduct VAT on costs related to VAT-exempt financial services provided to UK clients—something not currently allowed under EU rules.

Brexit Impact Vouchers

The Netherlands Enterprise Agency (RVO) offers Brexit Vouchers, allowing SMEs to get subsidies for advice on Brexit’s impact. The voucher covers up to 50% of the advisory costs, with a maximum of €2,500 (excl. VAT): https://mijn.rvo.nl/brexitvouchers

Brexit Tax Impact Scan & Taxperience VAT Team

The Taxperience VAT team is ready to assist you. With our special Brexit Tax Scan, we can clearly map out the fiscal implications of Brexit for your business in the areas of VAT and customs.

For questions, feel free to contact our Indirect Tax team.

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