Brexit and Tax Issues

Since Boris Johnson achieved a great win in the last elections, United Kingdom continues its way into Brexit road. Without an agreement between United Kingdom and European Union, we can only speculate about Brexit’s possible effects in relation with Taxation. However, we can assume that certain tax rules won’t be in force in the near future.

VAT

From VAT scope, United Kingdom would be considered as a country outside Community. This practically means that competent custom offices of each member state will charge its VAT for the imports from UK. United Kingdom would also charge a new UK-VAT for its imports respectively. For services provided to UK companies, when the reverse charge rule is applied, no VAT will be charged to the EU providers. For services provided to UK individuals, if the place of supply is United Kingdom, no VAT also will be charged. Furthermore, no EC sales and Intrastat lists should be submitted for the above mentioned transactions.

Income Tax Issues

Two main EU directives regarding intra-EU trade and investment won’t be in force after Brexit:

· the Parent/Subsidiary Directive that under conditions there was no withholding tax on dividends paid to parent companies.

· the Interest and Royalties Directives that again eliminates withholding tax in certain cases.

On the other hand, the Treaties for the Avoidance of Double Taxation remain in force since they are agreement between two countries.

Other Tax Issues

Another issue that should be considered concerns the UK branches entity. For example, branches of companies registered out of EU are considered by Greek legislation as separate entities and Greek Tax Law imposes capital raise tax of 1% for the funds transferred from the third country’s companies to the Greek branches.

Conclusion

Brexit can cause many tax implications. However, we need to have a final Brexit agreement in order to have a full insight of its total tax impact. It is certain though that this impact can have a serious effect globally since there is a great number of foreigners who owns a company registered under British law. Finally, it is interest to see whether Northern Ireland will enter on UK-VAT zone or will remain temporarily under EU-VAT one or will have both zones and how this mixed system will work.