Hard Brexit looming – recommended measures to limit VAT risks

Without a valid legal basis data exchange between the Austrian and British tax authorities will come to a halt in case of a no-deal Hard Brexit, resulting in an immediate need for action for some taxpayers registered for VAT purposes in Austria.

Status quo.

While the legal consequences of Brexit have been covered in depth by various publications, the practical implications of a discontinuation of data exchange have received less attention so far.

Input VAT refund procedure.

The harmonized EU-wide procedure for input VAT refunds to EU companies (so-called 8th directive refunds) will no longer be applicable for input VAT amounts incurred in the UK. Filing input VAT refunds via FinanzOnline (the tax portal operated by the Austrian tax authorities) will no longer be possible. Instead, the refund procedure would be subject to national British law only.

At this point, it is most likely that the current input VAT refund procedure for non-EU companies (so-called 13th directive refunds) would become applicable for all foreign companies post-Brexit, including companies established in Austria. Therefore, input VAT refunds with the British tax authorities would have to be filed in paper and different time limits would apply (6 months deadline instead of 9 months, starting on 30 June 6. of each calendar year instead of 31 December). With this in mind, input VAT amounts from 01-06/2018 might be at risk, since input VAT refunds for this period should have been filed until December 2018 under the 13th directive refund procedure.

VAT ID number validation.

In the case of a Hard Brexit the VAT ID number validation service (VIES) will no longer be available for British VAT ID numbers (GB + 9 digits, e.g. GB123456789), neither via FinanzOnline nor the service operated by the European Commission. Unless VAT ID numbers are validated (and the validations are properly documented) on a regular basis, taxpayers may then find themselves in a delicate situation , struggling to prove the VAT status of their business partners (e.g. intra-community supplies of goods or services rendered to British companies).

Conclusion.

While 29 March 2019 is rapidly approaching, the outcome of Brexit negotiations remains entirely unclear and the risk for a Hard Brexit is increasing. In light of these events, we highly recommend taking action by implementing the following measures as soon as possible, but in any case before 29 March 2019:

  • Filing of input VAT refunds for British input VAT amounts via FinanzOnline
  • Validation of VAT ID numbers of all British business partners and proper documentation of the validation results (unless already done on a regular basis).
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Stephan Wassipaul

Stephan Wassipaul

Senior Assistant | Deloitte Tax | Telefon: +43 1 537 00 4945 | E-Mail senden

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