Do I have to pay VAT on services from EU after Brexit?

How to account for a UK invoice

As of February 1, 2020, the United Kingdom has withdrawn from the European Union and has become a third country, following the end of the transition period last December 31, 2020. Until that date, EU law in its entirety has been applied in the United Kingdom.

Such an option requires being registered with Redeme and must be executed in November of the previous period. In the event that the declaration period until now has been quarterly, it may be changed to monthly by registering in the Monthly Return Register (Redeme), thus obliging the company to keep the Immediate Supply of Information (SII).

It is also important to take into account, from the point of view of Special Taxes, shipments or acquisitions of products subject to Special Manufacturing Taxes (Hydrocarbons, Alcohol and Alcoholic Beverages and Tobacco), will be considered as shipments made to or from non-EU third territories, applying the tax treatment foreseen for imports and exports.

How to invoice services to foreign companies

The purpose of this note is to analyze the European regulations that will be applicable for VAT purposes to supplies of goods, once the transitional period is over. In this way, the European Commission distinguishes three blocks of analysis:

Taxable persons established in one of the Member States or in the United Kingdom will be able to use the electronic portal set up by their State of establishment to submit a claim for reimbursement of VAT dues paid in the United Kingdom or a Member State, respectively, before the end of the transitional period.

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In this regard, the EU VAT rules on goods apply in the UK with respect to Northern Ireland. However, this is not the case for supplies of services, which would be considered as transactions between Member States and third countries.

This has a number of consequences that should be reviewed; among them, the movement of goods between Northern Ireland, the Member States, and other territories of the United Kingdom, which are qualified as intra-Community transactions, and exports/imports, respectively, or the application of Directive 2008/9/EC (relating to taxable persons not established in the Member State of refund, but established in another Member State) to claims for refunds of input VAT paid in the Community by entities established in the North of Ireland, and vice versa..etc.

VAT on services provided by foreign companies

It should be recalled that, following the exit of the United Kingdom, trade relations with the country headed by Boris Johnson will be governed by the general rules of the WTO, without the application of preferences, as from the date of withdrawal. In other words, customs formalities will apply to goods originating in or destined for the UK, with customs declarations having to be submitted and customs authorities being able to require guarantees for potential or existing customs debts; and customs duties will apply to goods entering the EU from the UK, without preferences.

Caution will have to be taken with the products and services to be exported as prohibitions or restrictions may apply and import and export certificates issued by the UK will no longer be valid in the EU (EU27).

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As a result, member states will levy VAT on the import of goods entering the EU from the UK, while exports to the UK will be exempt from VAT. The rules on the reporting and payment of VAT for supplies of services, such as e-services, and for cross-border VAT refunds will also change.

VAT on services rendered abroad to a Spanish company

If you intend to buy from or sell to companies in other European Union (EU) countries, i.e. to carry out intra-Community transactions, you should be aware that, if you do so as an entrepreneur, you must comply with a series of formal obligations, and that the purchase and sale of goods and services between EU companies are subject to special taxation.

In addition, VAT is also levied on commercial transactions of goods and services between professionals and companies resident in different EU member countries, so that no difference arises between buying from a supplier in one country and buying from a supplier in another.

However, VAT is applied in a special way to these intra-Community transactions. The advantage of intra-community VAT for businessmen and self-employed people who export and import within the EU is that they do not have to charge or pay VAT on their invoices to customers and suppliers in the member countries, although in order to do so they must be registered in the Register of Intra-community Operators (ROI).

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