BREXIT: New ways of business for UK company with no PE in France

BREXIT: New ways of business for UK company with no PE in France

BREXIT: New ways of business for UK company with no PE in France 1500 981 Exponens International

BREXIT: New ways of business for UK company with no PE in France

Published on 02/08/2021

Since 1st February 2020, the United Kingdom (UK) has withdrawn from the European Union (EU) and has become a “third country”. The Withdrawal Agreement provided a transition period until the 31st December 2020. In 2020, nothing changed.
The EU and the UK came to a last-minute trade deal on Christmas Eve, avoiding the hardest of all potential Brexits. But major tax uncertainty remains, waiting comments from French tax authorities. For now, French authorities answer some of our questions via a FAQ updated following the trade deal of December 2020.

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VAT RULES FOR CROSS-BORDER SUPPLIES OF GOODS

Supplies and movements of goods between the EU and the UK will be subject to the VAT rules on imports and exports. So, goods which are brought into the VAT territory of the EU from the UK or are to be taken out of that territory for dispatch or transport to the UK will be subject to customs.
In addition to that, an exit from the EU means that your company would no longer have to file Intrastat returns. Thus your company would need to obtain an Economic Operators Registration and Identification (EORI) number, which is an EU registration and identification number for businesses, only if your company undertakes the import or export of goods into or out of the EU.

NEW EU VAT SIMPLIFICATIONS SYSTEMS

Distance sale regime, call-off stock and triangulation are VAT simplification regimes will end with UK in 2021.
But new import VAT/customs simplification systems will apply. For instance, EU delivery from UK to consumers (B2C) could be declared and paid via a new 2021 submission system, the “Import One Stop Shop” (IOSS). This will create a more efficient and easier customs clearance. Unfortunately, this IOSS system will be postponed until 1st July 2021 (after Brexit effectiveness).

FRENCH VAT REGISTRATION

UK companies providing services and goods in France could still need to register for VAT in France. These will concern taxable services or supplies for UK company selling to consumers (B2C) in France from another Member State (MS), shipping stock of goods in France from EU, or UK company taxable locally in France for services.
As the last release in the FAQ indicates, the UK operators with no Permanent Establishment (PE) in France will be exempt from appointing a tax representative for the payment of the French VAT.

VAT REFUND

UK businesses incurring EU VAT on travel, hotel or other expenses will no longer be able to use the 8th Directive online VAT reclaim system. Instead of filing your claim via the online form of HMRC, UK companies will designate a tax representative in order to obtain the VAT refund (13th VAT Directive). But VAT chargeable in 2020 will continue to apply 8th Directive online VAT reclaim system via HMRC.
If the UK company is VAT registered in France, the company will ask for refund as they fill their VAT return in France (no 13th VAT Directive).

EXCEPTION FOR THE NORTHEN IRLAND

The EU and the UK have agreed that Northern Ireland is treated as if it were a Member State, the initial period of application extending to 4 years after the end of the transition period. But the Ireland/Northern Ireland Protocol provides that EU VAT rules apply only to goods (not to services). This means that transactions in services between MS and Northern Ireland will be treated as transactions between MS and third countries/territories.

The information related to the practical consequences of the Brexit given by French tax authorities are very parsimonious. Thus, we are still monitoring the announcements by France and EU authorities. In the meanwhile, we are available to discuss any issues you may face at this stage of the Brexit.

Related insights:

Brexit – UK R&D expenses and French R&D tax credit – Read article
Brexit – New ways of business for intragroup relationship – Read article
Brexit – New ways of business with UK for flow of goods – Read article
Brexit – New ways of business for representative offices – Read article

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