The VAT Implications of the United Kingdom’s Withdrawal from the EU on 1 January 2021

In connection with the withdrawal of the United Kingdom (“UK”) from the EU, the transitional period ended on 31 December 2020, and therefore the UK is from 1 January 2021 considered as a third country (in the same way as, for instance, the USA, Russia or China). In this context, we would like to draw attention to the following VAT implications:

1. The specific situation regarding the island of Ireland means that Northern Ireland continues to be considered part of the EU (at least until 1 January 2025). Therefore, movement of goods between Northern Ireland and the Czech Republic will continue to be considered as supplies of goods between European Union Member States, with all related consequences such as the possibility of exemption from VAT, proof of transport, etc.
2. Movement of goods between the rest of the UK (excluding Northern Ireland) and the Czech Republic will be considered imports or exports of goods in terms of VAT. As of 1 January 2021, it is also not possible to apply specific procedures, rules and special regimes to such goods, such as remote sale, triangulation or call-off stock regime.
3. In cases of providing services between entities in the UK (including Northern Ireland) and the Czech Republic, it will depend on determining the place of supply (performance). Based on the place, it will be clear from the legislation of the given state as to the obligations the provider and the customer have in the given case.
4. In a case of a VAT refund to a foreign person registered for VAT purposes in another country, a Czech VAT payer will be able to request by 31 March 2021 a refund of VAT paid in the UK by 31 December 2020. Within the same period, a British VAT payer can apply for a refund of VAT paid in the Czech Republic by 31 December 2020. With regard to VAT paid on the acquisition of goods or receipt of services after 1 January 2021, it will no longer be possible to proceed according to the existing procedures. The only exception will be the acquisition of goods by a Czech VAT payer in Northern Ireland or a Northern Irish VAT payer in the Czech Republic (the classic option to apply for a VAT refund by the end of September of the following year).
5. For a refund of VAT on the acquisition of goods or services in the Czech Republic after 1 January 2021, the recipient of which will be a taxable person established in the United Kingdom (outside Northern Ireland), the institute of VAT refund to foreign taxable persons will be used if conditions according to the Czech VAT Act are fulfilled. Such a request is then submitted directly on a prescribed form to a specifically designated Tax Office (for the capital city of Prague).