VAT after Brexit: New changes in the procedure

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The fact that The United Kingdom exit the European Union, has arised numerous changes. In this sense, with regards the procedures for the input VAT refund for British entities in Member States, there has also occurred a change, which we are going to explain as follows.

VAT recovery by British companies in the European Union after Brexit.

Firstly, before Brexit occurred, the process of requesting a VAT refund was carried out through a digital form via the electronic portal of the country of establishment of the entity, that is, the same procedure as for any EU company.

Furthermore, until 2021, UK entities were covered by Article 171.1 of the VAT Directive 2006/112/EC, which includes the possibility of obtaining a refund of VAT payments from entities stablished in the European Union in other Member States.

Nevertheless, since the UK exit the European Union, the procedure by which the refund is covered is now stablished in article 171.2 of the aforementioned Directive. This means that reciprocity of treatment is now required between the country of establishment of the entity and the country in which the VAT is borne.

In some cases, EU Member States may establish their own criteria if there is no reciprocity agreement. For example, Spain allows VAT claims from companies not established in the European Union, even if there is no reciprocity when the VAT borne by the entity is for one of the following items:

  • The acquisition of templates, moulds, tooling, and equipment to be made available to a Spanish entity for the purpose of manufacturing parts.
  • Access, hotel, catering, and transportation services related to the attendance to trade fairs, congresses, and exhibitions of a commercial or professional nature.

However, this is not an issue with UK entities as the UK signed VAT reciprocity agreements with most Member States as a matter of urgency.

Consequences of the new VAT recovery procedure

Reciprocity agreements allow you to apply for VAT recovery when the company in question does not belong to the EU. The problem arises with the administrative and bureaucratic burden involved in this procedure. The main differences for European entities are as follows:

  • The mode of filing is no longer electronic in many Member States. In countries such as France, paper forms are required to be submitted to the administration. In Spain it is electronic, but there is a need to obtain a NIF from the tax administration for filing.
  • In many of the Member States of the Union it is necessary to designate a fiscal representative in the country of application for the VAT refund. This representative is usually also jointly and severally liable with the applicant entity.
  • The deadline for filing is usually June 30, instead of September 30. It is true that Spain is one of the few countries that keeps the deadline on September 30.
  • On many occasions, the administration’s request the presentation of original documentation such as the invoices for which the VAT is being claimed.

How to recover UK VAT if you are a European company

As abovementioned, the procedure for input VAT on European entities in the UK has also changed. It is also a process with a greater administrative and bureaucratic burden since:

  • The mode of filing is no longer electronic and paper forms are required to be filed with the administration.
  • The deadline for filing is 6 months from the end of the tax year, which in the UK is between July 1st and June 30th of the following year. In other words, the deadline for filing is December 31, 2022.
  • Along with the refund application, original documentation such as the invoices for which VAT is being reclaimed must be attached to the administration.

As it can be seen, the VAT refund application process has become complicated for UK entities in the European Union, as well as for European entities. It requires a bureaucratic burden that companies often do not have time to manage.

We assist in the VAT recovery process of your company.

In Ayming Spain, we have extensive experience assisting companies, both Spanish and foreign, in applying for VAT refunds in member countries of the European Union and outside it.

We offer comprehensive advice from the moment you provide us with the invoices until the competent administration has refunded the requested VAT. Specifically, our services include:

  • Review of the invoices issued by the supplier to determine if the output VAT is correct.
  • If the VAT is incorrect, we assist in obtaining a refund of the VAT incorrectly charged by the supplier.
  • Fiscal representation for procedures that require it, such as those outside the Union.
  • Preparation and filing of the VAT refund application.
  • Receipt of any notification that may be issued by the administrations in relation to the procedure.
  • Assistance and preparation of the administrative response to the requests that may be required.
  • Follow-up and contact with the administration to speed up the process as much as possible.

Do you need to optimize your company’s time? We take care of the VAT of your invoices. Our experts in the tax area have more than 30 years of experience in VAT advice and recovery. Let’s talk!