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Correct accounting for VAT when trading with Great Britain

Correct accounting for VAT when trading with Great Britain

On Christmas Eve, the European Union and Great Britain finally agreed on a trade and cooperation agreement. The UK's withdrawal from the European Union will mean some changes to trade between the UK and the EU, especially from a VAT perspective. What applies and what exceptions are there? Our VAT expert, Jens Wieden, explains.

– From 1 January 2021, the same rules regarding VAT apply to the UK as they apply to other countries outside the EU. However, there are certain exceptions to this general rule, including special rules for trade with Northern Ireland, says Jens Wieden.

Buying from companies in the UK

Purchases of goods from companies in Great Britain will normally have to be treated as imports in Sweden after Brexit. This means that the customs declaration must be submitted to the Swedish Customs Administration, which decides the monetary customs value. The cash customs value together with customs duties and other taxes (excluding VAT) as well as additional costs for transportation from the point of entry form the basis for calculating VAT. The tax basis and VAT must be reported to the IRS in the regular VAT return. Provided you have full deduction rights, a similar deduction for VAT is also made in the same VAT return.

– The financial consequences of VAT will not necessarily be very different than before when it was instead a so-called intra-union acquisition where the buyer in Sweden reported the outgoing and incoming VAT for the purchase. The big difference is that purchases also mean that a customs declaration must be submitted to the Swedish Customs Administration and that in some cases there may be a customs issue on certain goods depending on the source of the goods, explains Jens Wieden.

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The exception is Northern Ireland

After Brexit, Northern Ireland is considered an EU country when goods are traded between Northern Ireland and the EU. This means that if a Swedish company buys goods from a company in Northern Ireland, the purchase must be treated as an intra-union acquisition. Businesses in Northern Ireland have received changed VAT numbers for trade with the EU where 'GB' has been replaced by 'XI'.

With regard to trade in services with Northern Ireland, this trade must be treated as trade with a non-EU country. Northern Ireland is the only EU country in terms of trade in goods

He thinks about

  • Is the sale related to goods or services?
  • Are purchases made from Northern Ireland or any other part of the UK?
  • Make sure you have an EORI number.
  • Ensure the accuracy of the cash customs value upon import (customs declaration).
  • Calculate the correct tax base and VAT (VAT declaration).

Sales to companies in the UK

In the same way as purchases of goods from Great Britain should be dealt with imports should also be dealt with Sales of goods to Great Britain are treated as exportsExcept for Northern Ireland.

This means, among other things, sales to Great Britain

  • Not subject to Swedish VAT,
  • It must be reported as an export on the VAT return,
  • It must be reported in the export declaration to the Swedish Customs Administration,
  • May not be reported in a periodic summary,
  • You must be able to prove documentation showing that the goods have been transported outside the EU.
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Please note that when selling goods to Northern Ireland, Northern Ireland is an EU country. Sales of goods to businesses in Northern Ireland should continue to be treated as sales within the Union, with the requirement to enter the buyer's VAT number, among other things.

5 tips to prepare for Brexit

He thinks about

  • Is the sale related to goods or services?
  • Are you selling to Northern Ireland or any other part of the UK (applies to goods only)
  • Analyze the conditions of transport applicable and who acts as the importer in the UK.
  • Analyze whether sales, whether goods or services, may trigger UK VAT registration.
  • Make sure you have the correct transport documents showing that the goods have left Sweden.
Our expertise in: international taxes

Services

Our expertise in: international taxes

Do you want to know more? Take a look at our recorded webinar

Brexit, customs, VAT – it's real now

Also visit our website Collection page For tips and advice on how to deal with the new VAT rules for e-commerce.