Brexit – what to be prepared for?
As of today there is still no certainty around what Brexit will mean for business that sell and buy from the EU. We don’t know yet what kind of agreement UK will have with the European Union (if any) so preparing for Brexit at this stage seems impossible. However, we can make some educated guesses as to what the situation is likely to be after Brexit and make some reasonable preparations, sufficiently flexible to cope with a variety of possible outcomes.
What we do know at this point, that since UK will not longer be a part of the EU, Brexit will have strong implications on VAT rules that your business needs to be aware of. What is going to change?
VAT rates for non-taxable persons
If the UK will not be a member of the European Union any longer, it will probably also not be a part of the MOSS system. VAT MOSS (Mini One Stop Shop) is a way of paying VAT if your business supplies certain digital services to non-taxable consumers in the EU – in countries where they do not have an entity – and to account for the VAT due on those supplies via a web portal. These services are always taxed in the country where the customer resides – regardless of whether the customer is a business or consumer – and regardless of whether the supplier is based in the EU or outside. Without MOSS, businesses selling these supplies would be obligated to register for VAT, file returns and make payments in each customer’s individual country.
After Brexit individual clients from the UK will not have to be charged their local tax rates. To comply with these changes in your HostBill go to Settings -> Currency & Tax -> Taxes and once the Brexit takes place remove the local tax rate for the UK.
Reverse VAT Charge
When you buy goods or services from suppliers in other EU countries, the Reverse Charge moves the responsibility for the recording of a VAT transaction from the seller to the buyer for that good or service. That way it eliminates or reduces the obligation for sellers to VAT register in the country where the supply is made. If the supplier incurs any local VAT on costs related to the service or goods supplied under the Reverse Charge, they may recover them through an EU VAT reclaim.
After Brexit, the reverse charge will most likely not be applicable to the UK companies. Our VIES VAT EU plugin (and HostBill itself) will be updated to adhere to these changes.
Domestic VAT within the UK
The domestic VAT within the UK is very unlikely to change following Brexit, regardless of whether it will be a “no-deal” Brexit or if some agreement will be made. VAT rates are also unlikely to change.
HostBill Brexit update
The update will be released shortly before Brexit. We will inform you once Brexit’s date and conditions will be officially confirmed. With the update
- Auto-tax exemption for the new companies from the UK will be turned off
- Reports/statistics connected to EU and MOSS will be updated
- A feature in the VIES VAT module that will allow to turn off tax exemption for all companies outside of UK that have tax exemption turned on with just one click.
We won’t know for certain how VAT will actually be handled until we know the details of the Brexit agreement as this is still up for discussion between the UK and EU. This article is based of what we know as of today and we’ll update it should needs be.
Brexit may also have impact on domain registrations. As of today, Registry EURid manages the .eu extension under mandate of the European Commission. According to the current law the registrant of a .eu domain must reside within the European Union.
As of the withdrawal date, undertakings and organisations that are established in the United Kingdom but not in the EU and natural persons who reside in the United Kingdom will no longer be eligible to register .eu domain names or, if they are .eu registrants, to renew .eu domain names registered before the withdrawal date. As for now, any plans regarding .eu domain names registered to individuals and organizations located in the United Kingdom and Gibraltar have been put on hold by EURid until official updates from the European Commission on how to proceed will be announced.