Brexit: consequences on VAT refunds for the companies established in the EU

Attention: the following information are indicative and are likely to change quickly.

The Brexit transition period will end on 31^st December 2020. This means that starting on 1^st January 2021, the United Kingdom will officially cease to be part of the European Union, with all the consequences this implies.

Regarding VAT returns for companies established in the EU, the main consequence of the Brexit will be that the electronic portal for VAT refunds between the EU and the United Kingdom will shut down on 31^st March 2021.

What changes for the British companies that apply for European VAT refunds?

At the moment, for a company established in the United Kingdom, the refund of VAT paid in another Member State of the EU operates through the “9^th directive” procedure, by filing an application through the electronic portal available from the UK.

This application must be submitted at the latest on 30th September of the year following the year when the VAT was paid.

After a basic check of the compulsory data, this application is then electronically forwarded to the relevant fiscal service of the Member State, which will handle the refund application.

Due to the Brexit, European VAT refund applications for VAT paid in 2020 must be submitted:

• Until 31^st March 2021 through the European electronic portal;
  • From 1st April 2021, through the “13th directive” application procedure that applies to non-EU companies.

What are the changes for European companies that file British VAT refund applications?

Today, for a company established in an EU Member State (other than the United Kingdom), VAT paid in the United Kingdom is refunded through a procedure called “9^th directive” by filing an application through the electronic portal accessible from a company’s country of establishment.

This application must be submitted at the latest on 30th September of the year following the year when the VAT was paid.

After a basic check of the compulsory data, this application is then electronically forwarded to the relevant fiscal service in the United Kingdom which will handle the refund application.

Due to the Brexit, VAT refund applications for British VAT paid during 2020 will have to be submitted:

• Until 31^st March 2021 on the European electronic portal;

• Directly to the British tax administration through a procedure specific to the United Kingdom from 1st April 2021.

What happens to the VAT reciprocation agreements?

Non-EU companies are, in principle, entitled to a refund of the VAT they have paid in one of the 28 Member States of the EU.

Some EU member states grant VAT refunds to all non-EU companies, without distinction according to their country of establishment.

However, other EU Member States make the VAT refund conditional on the existence of reciprocity agreements with the country of establishment of the company, or at least de facto reciprocity regarding VAT refunds.

Source : HM Revenue & Customs