No deal Brexit? Make sure you are prepared!
All Brexit scenarios, from postponement to cancellation, are still open but we seem to be heading for a ‘no-deal’ Brexit on March 29th. After the United Kingdom has left the European Union, mutual relationships in several areas will change. In case of a no-deal Brexit, the United Kingdom (hereafter: UK) is no longer part of the European internal market and the customs union. This means that free movement of goods and persons is in principle no longer possible. The most striking changes in a no-deal Brexit will arise in the area of customs and in relation to employees working cross borders. Be prepared for this!
Points of attention regarding import and export
If case your company is doing business with the UK, you will need to be able to make customs declarations. To make this possible you have to consider the following:
- Request an EORI number (Economic Operators Registration and Identification).
- Customs declarations: you can outsource this to a customs agent, but also do it yourself. In that case, you have to purchase the necessary software and register with Customs for electronic messaging.
- Please note: if you do not do business directly with the UK, but you do import or export with transit through, or transshipment in, the UK: you may be able to do this via a ‘Transit procedure’, as a result of which customs clearance and customs duties can be prevented.
Make sure you have insight in additional (customs) costs:
- Assess the Harmonized System (HS) codes of the goods. You can assess import duties based on these codes. In case of a no-deal Brexit, the import duties in the EU will be subject to the WTO import duties, which also apply to other countries with which there is no trade agreement.
- UK import duties will apply to import into the UK. These will probably be the same or similar to the EU’s WTO rates.
- Once the import duties are known, you can use this to determine the consequences for profit margins and, if necessary, to revise the pricing of products.
Also for VAT purposes, the status of the UK will change:
- After the Brexit, export to the UK will be considered export out of EU for VAT purposes and the 0% rate will apply. All transactions will have to be well documented, with which it is demonstrable that the goods have left the EU.
- VAT is charged on import from the UK. Make sure to request an ‘article 23 license’, so that the moment that VAT becomes due will be deferred to the moment of filing the VAT return (and will then be neutral) instead of VAT becoming due directly at the time of import.
Also keep in mind that it will become obligatory to have export documents, permits and certifications such as the ‘Certificate of Origin’ and EUR.1 certificate in place for export and import. In addition, please check which additional regulations you have to comply with depending on the sector in which your company is active, for example in the case of trade in strategic goods, animals and plants, medicines, dairy, etc.
Points of attention regarding employees
For British employees who are legally working and staying in the Netherlands at the time of a no-deal Brexit, a transitional arrangement for 15 months is announced. During this period, they can continue to live and work in the Netherlands and they must apply for a permanent residence permit.
For business travelers who commute between the UK and the Netherlands, this does in principle not apply. Britons who only come to the Netherlands (and vice versa) to work will need a work permit. Make sure to start a work permit procedure for these employees as soon as possible, because it may take some time before it is issued!
If a British employee wants to settle in the Netherlands after a no-deal Brexit, a work and / or residence permit is required. The easiest and fastest route for this is to apply for a highly skilled migrant permit for employees with specific knowledge and / or skills. The employer must then be registered as a recognized sponsor with the IND.
The question also arises where employees who work in the Netherlands and live in the UK (or vice versa) should have their social security. The EC Regulation that now regulates where an employee who works cross border is insured will no longer apply after the Brexit. Possible consequence may be that employees are no longer insured, or double, which can lead to considerable costs. Please consider this and take action where necessary!
Any questions? Please contact Van Duyn Van der Geer and ask for our colleague Bas van Gorp, Tax advisor, at +31 (0)71 409 04 09 and firstname.lastname@example.org.