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The influence of Brexit on taxes during the transitional period


On February 1, 2020, Great Britain left the European Union. At the same time, the transitional period, has begun, as stipulated in the UK withdrawal agreement, which will last until the end of 2020. The conditions of trade between the EU and UK will not change in the upcoming 11 months. However, it will be the time for development of new regulations will be in force after the transitional period has expired, as well as for preparation of new conditions of cooperation. 

As the Ministry of Finance informs, the United Kingdom will be still treated as a Member State during the transitional period. This means that it will participate in the single market and customs union, make contributions to the EU budget on the basis of existing rules, as well as benefit from the EU programmes which will operate until the end of 2020. However, it will not be represented in the EU institutions, particularly in the EU decision-making process.

The Ministry of Finance points out that during the transitional period there will not be any substantial changes for Polish businesses and citizens. Until December 31, 2020, lack of customs and quotas and other additional barriers in trade will continue. Great Britain remains in the customs union with the EU and will be a participant in the EU common market. The ability to export goods to Great Britain will remain unchanged. There will be no need for submitting customs declarations, holding additional tax documents (such as certificates of origin) or, not hitherto required, product certificates. Until the end of 2020, customs permits issued by the United Kingdom under the EU Customs Code will also remain valid. Under the existing rules, VAT and excise tax regulations will apply - including exemption limits for travelers, or the operation of tax information systems.

Currently, it cannot be determined how the relations between the EU and Great Britain will look like after the end of transitional period. The terms of economic cooperation from January 1, 2021 will depend on the content of the future free trade agreement between Great Britain and the European Union. However, considering the need to agree on many particular issues, which have so far been regulated at the EU level, completing negotiations within 11 months remains a challenge. If no agreement is reached before the end of the transitional period, trade between the EU and UK will be carried out under the general principles of the World Trade Organization. This will result, among other things, in the introduction of customs and customs controls, changes in the rules of settling VAT and excise duties and the need for both businesses and exporters to adapt to British regulations.


Anna Skórska, Tax Consultant, ATA Tax Sp. z o.o.

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