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In a Post Brexit world…
What will happen should the United Kingdom leave the EU without a deal for those that are currently registered for VAT in Europe as distance sellers? There are several potential hypotheses to this. They, are, for now only hypotheses but serve to give an indication of how you may prepare yourself for a “No deal” Brexit.
Let’s take an Amazon trader as an example. The trader is registered on the FBA (Fulfilment by Amazon) platform in six countries (France, Italy, Germany, Spain, Poland and Czech Republic). Currently, the trader has a UK Ltd company and is registered for VAT in the UK. This enables the trader to register the UK Ltd company for VAT around Europe. Third countries such as USA can register for VAT directly in a few countries in Europe but not all have agreements in place.
Post Brexit – if we leave without a deal – registering the UK company directly for VAT in the European Union may not be permissible as the UK could be construed as a third country (similar to the USA) and therefore the following may be required.
Option one would be to set up a company within the European Union and to register that company for VAT – the EU based company could then be registered for VAT in the additional countries that form part of the FBA platform. This leaves the trader in control of paying and submitting their VAT returns, EC Sales and Intrastat (if above threshold in country). Setting up a company in France, Italy, Germany, Spain, Poland or Czech Republic can be done but each has its differing requirements and processes including share capital and director requirements as well as timescales.
Alternatively, option two would be to hire the services of a fiscal representative that is based in the country in which the stock is held which will allow the trader to submit and pay the VAT returns locally. The issue with this option lies in the “control” element. The fiscal representative would be acting on behalf of the trader and paying on behalf of the trader. From a risk perspective, the fiscal representative may take VAT payments “on account” to ensure that these returns are paid for and that they are not left responsible for none-payment which may hinder cashflow for the trader. The trader has no control over the return and payment process and leaves the fiscal representative to do this on their behalf.
This is a choice that may need to be made sooner rather than later if we leave the EU on March 29th 2019.