The EU-UK Trade and Cooperation Agreement: relevant implications

8 January 2021 - The EU-UK Trade and Cooperation Agreement, concluded between the European Union and the United Kingdom on 24 December 2020, sets out preferential arrangements in several areas including trade in goods and services, digital trade, intellectual property, public procurement, aviation and road transport. The agreement is underpinned by provisions ensuring a level playing field and respect for fundamental rights. In this article we guide you through the most important implications for customs, VAT, corporate tax and work and residence.

Three main pillars

The Agreement consists of three main pillars:

  • A Free Trade Agreement (FTA)
  • A new partnership for citizen security
  • Agreement on governance

The FTA has been officially ratified by the Dutch government on 30 December 2020 and it entered into force on 1 January 2021. Below we listed the main considerations.

Customs

  • Despite the FTA, customs checks and formalities are in place as from 1 January 2021.
  • Since the FTA includes preferential origin, the so called Rules of Origin (RoO) are crucial to establish, to ensure you qualify for free tariff access. In practice, the EU exporter can register for the Registered Exporter System (REX) and confirm origin as such. When importing from the UK, importers knowledge is accepted as well. One needs to realize that the FTA aims to smoothen the border process, however, the responsibility towards the authorities on correctly applying the RoO  remains at the importer.
  • As an EU member state, the Netherlands offers the possibility to obtain a ʽruling’ on origin via the Binding Origin Information (BOI), enabling compliance with RoO for three years.
  • In case the UK does not levy customs duties on the goods, the EU exporter is not obliged to include a statement on origin.
  • For non-EU / UK origin products, the regular customs duties are applicable.
  • Special schemes apply for specific products and repair-goods.

VAT

  • From 1 January 2021, businesses need to ensure their systems are set up or updated to handle the new VAT requirements and customs arrangements and manage without EU VAT simplifications.
  • The intra-community supply of goods rules do no longer apply on the transfer of goods from the EU to the UK (exempt or 0% rate). Different rules apply to Northern Ireland - EU supplies of goods.
  • The transfer of goods from the EU to the UK qualifies as export (0% rate) and the transfer of goods from the UK to the EU as import (0%, 9% or 21% rate). Different rules apply to Northern Ireland - EU supplies of goods.
  • The VAT is immediately due, on the import to the EU, unless the EU importer applied for the so-called ʽarticle 23 permit’.
  • The digital services scheme, the call-off stock scheme, the distance selling scheme as well as the Mini-One-Stop-Shop (MOSS) no longer apply in the UK.
  • The upcoming VAT e-commerce simplifications and One-Stop-Shop (OSS) cannot apply for the UK businesses. UK importers however might benefit from the Import-One-Stop Shop (IOSS).

Corporate tax

  • From 1 January 2021, EU law including Directives, Regulations and the CJEU decisions should in principle no longer be applicable in the UK.
  • In particular, taxpayers should asses situations including the application of the EU Parent-Subsidiary and the EU Interest and Royalties Directive as now they should refer to the UK – Netherlands double tax treaty for the avoidance of double taxation.
  • Following the UK / EU Trade and Cooperation Agreement, the UK has decided to devise its own reporting of cross border arrangements to conform with OECD agreed standards and rules, while retaining a requirement to report in line with its previous EU DAC6 rules only those arrangements where hallmarks D1 or D2 concerning the frustration of beneficial ownership reporting are present. It is still necessary to consider whether there is any EU DAC6 reporting requirement in any other EU member state, according to the rules in that member state.

Work and Residence

  • No work is permitted, and anyone wishing to work must obtain the relevant employment authorisation and visa before travelling. As an employer, you will need to ensure that you know where your employees are and that they have the right to reside and work in the countries they are in.
  • The EU Regulation (EC) 883/2004, which coordinates the social security contribution across the EU, no longer applies. However, the Protocol to the FTA, states that persons to whom the Protocol applies will be subject to the legislation of one State only. In principle, the Protocol rules follow the principles of the EU Regulation (EC) 883/2004 with some deviations. For employment relationships that existed before 31 December 2020 and continue without interruption, the beneficiary status under the withdrawal agreement will remain valid, respecting and applying the rules under EC 883/04.
  • Free movement of persons no longer applies. Accordingly, EEA and Swiss nationals need to qualify for status under either the new Points-Based Immigration system or the EU Settlement Scheme. The deadline for applications to the EU Settlement Scheme (EUSS) is 30 June 2021. However, it is recommended that eligible individuals apply as soon as possible to ensure they have the relevant documentation to show their residence in the UK.
  • EEA and Swiss employees employed before 30 June 2021 can continue to evidence their right to work through the use of their passports or National ID cards. Alternatively, EEA and Swiss citizens who have status under the EU Settlement Scheme or under the points-based system may choose to evidence their right to work through the Home Office’s online verification system.
  • There is a visit limit of 90 days in a 180 day period for short term visits between the UK and the EU. This will cover conferences, meetings, trade shows and customer and supplier negotiations.

Want to know more?

Do you require more information? Please contact Eline Polak by e-mail or by telephone: +31 (0)88 277 23 25 or Alexander Rasink by e-mail or by telephone: +31 (0)88 277 16 15 or Erik Stroeve by e-mail or by telephone: +31 (0)88 277 24 55. They will be happy to help you.