How to prepare?
Since 1 February 2020, the United Kingdom is no longer part of the European Union. However, in accordance with the withdrawal agreement (Council, 2019/C 384 I/01) concluded between the EU and the United Kingdom, European law remained applicable until the end of 2020.
At the last minute, the EU and the UK concluded a Trade and Cooperation Agreement, which focuses on three main pillars: a free trade agreement, a new partnership for citizens’ security and a horizontal agreement on Governance. In light of the current exceptional circumstances, the European Commission proposed to apply the Agreement on a provisional basis for a limited period of time until 28 February 2021. Meanwhile, the Agreement will have to be reviewed by the EU27 ambassadors and the UK parliament for adoption as of 1 January 2021.
In view of these recent developments, further analysis of the agreement is required to assess its impact on the below information.
Time for action
Businesses will now need to pore over the detail of the final agreement to fully understand the implications. Some will be disappointed, others will be relieved, but the return of some certainty into the business planning process will be highly welcome. It’s just now that the hard work to adapt and succeed in this new reality starts.
However, we see that many businesses are still not fully prepared, partly due to the effects of the COVID-19 pandemic on their businesses, which is understandable. But BDO is here to help. That is why we have developed a high priority list of tax and legal actions.
VAT and Customs
- Request your Belgian EORI number and the E.T. 14,000 licence
- You will need this EORI number to trade with countries outside the EU (so-called third countries). The EORI number must be requested in the Member State where you are established. For non-EU companies, it must be requested from the customs authority of the Member State in which they are filing a customs declaration for the first time.
- When you have obtained an E.T. 14,000 licence, the payment of the import VAT is transferred to the periodic VAT return. As a result, you do not have to pre-finance the VAT at customs when the goods are imported.
- Map your supply chain - who is the importer/exporter? What is the tariff classification of the finished products? Check whether the goods qualify as “originating goods” under the terms of the Agreement between the EU and the UK.
- Check whether your forwarders are aware of the changes as of 1 January 2021.
- Check whether you need to agree other Incoterms with your customers/suppliers.
- Check whether the designated importer/exporter complies with the location criteria for customs legislation.
- Who is responsible for the import/export declarations?
- In case of a third-party responsible such as a customs representative: verify whether they have sufficient capacity. Compliance remains entirely or partially your own responsibility.
- In case of an in-house responsible: what is the cost and from when will you operational?
- Check whether special permits are required depending on the nature of the goods supplied.
- Check whether your customs processes can be simplified by applying for a customs permit. Customs permits simplify the process, allowing goods to be stored temporarily or allowing you to work under suspension of customs duties and VAT. Keep in mind that this often requires a deposit or security to be made available to customs.
- Are there sufficient controls in place to ensure that you comply with the applicable laws and regulations (e.g. obtain Suppliers Declarations to support verification of origin status)?
- Is there a need for training on customs legislation and customs processes?
Read more: Impact of Brexit on VAT and Customs
Corporate Income tax
- Map (inter-company) flows (primarily interests and royalties) subject to Belgian withholding tax as from 1-1-2021 either at the full rate or the lower tax treaty rate.
- Ensure correct (tax) treatment of cross border reorganisations (e.g. cross border merger) and domestic reorganisations with foreign shareholders (e.g. merger between 2 UK legal entities having a Belgian corporate shareholder). Especially those transactions that were exempt from income taxation under the EU Merger Directive that applied up to 31-12-2020 (mergers, contributions, etc.).
- Review substance of newly incorporated companies in the UK to ensure they’re considered UK tax residents (managed and controlled from the UK).
Read more: Impact of Brexit on Direct tax
Personal Income Tax / International Mobility
- Transfer substantial investments (+25% individually or together with relatives) in Belgian corporation to UK Buyer prior to 31-12-2020 to ensure capital gain is exempt from personal income tax.
Read more: Impact of Brexit on Direct tax
Labour Law / Social Security
- If you are sending out employees to work in the UK:
- Check conditions to apply for a sponsor license.
- Have the employee apply for a work visa (new points-based immigration system).
- In case of secondment: submit an application for a secondment certificate (138ter) to the Belgian social security administration (RSZ/ONSS).
- If you are hosting UK employees in Belgium:
- For UK employees seconded to Belgium before the end of 2020:
- Apply for an A1 declaration from HMRC.
- Make sure the employee registers as a resident in a Belgian town or city hall before the end of 2020.
- For UK employees coming to Belgium as of 2021:
- Apply for a work permit (<90 days) or single permit (>90 days) for the employee to work (and reside) in Belgium).
- In case of secondment: apply for an exemption from Belgian social security (article 3 of Belgian social security law).
Read more: Impact of Brexit on Social law
- Have a good understanding of your data protections responsibilities to avoid potential financial and reputational sanctions:
- Fully understand your personal data flows across the organisation and to third parties.
- Identify which data flows bring an exposure to international personal data transfer.
- Conclude on the transfer mechanism to be relied on for each transfer.
- Identify where an assessment and/or contractual changes will potentially need to be made.
- Identify whether a representative needs to be appointed in the EU.
- Pending the end of the transition period, and in order to prepare as well as possible, we recommend to:
- Investigate and assess whether the UK has sufficient non-EEA protections in place, taking into account the specifics of your organisation’s data flows to the UK, i.e. that there is nothing that would prevent the full application of the European Standard Contractual Clauses.
- If required, identify and adopt supplementary measures in order to bring the level of protection of the transferred data up to the standards expected by the EU. These could be technical safeguards, contractual safeguards or organisational measures.
Read more: Impact of Brexit on Data Protection
The economic, business, legal, regulatory and tax implications will be determined by the political process and negotiations, but BDO is well-positioned to monitor and inform its clients.
Our experts can support your business in:
In close collaboration with our UK colleagues, BDO Belgium is on top of any news on the progress of the UK withdrawal procedure.