Brexit update: European Commission proposes amendments to the EU rules on VAT


European Commission proposes amendments to the EU rules on VAT to facilitate trade between EU Member States and Northern Ireland once Brexit will become effective

The European Commission recently proposed a key amendment to the Value Added Tax (VAT) Directive in order to facilitate trade between Northern Ireland and EU Member States in a proper manner once Brexit will have effect and in line with the Protocol on Ireland/Northern Ireland.

The proposed changes introduce a special identification number for businesses in Northern Ireland in order to ensure a proper application of EU VAT provisions to goods to be traded by them after the transition period between Northern Ireland and EU (and vice-versa).

In the Protocol it’s agreed that EU VAT rules will – contrary to services – continue to apply when it comes to the goods to be traded in Northern Ireland. This implies that goods to be sold and transported from Northern Ireland to the EU (and vice-versa) after the transition period will be treated the same as cross-border supplies of goods within the EU, including for VAT exemptions and deductions.

Considering the adjustments that this amendment to the VAT Directive will trigger for companies’ Enterprise Resource Planning (ERP) Software as well as Member States’ IT System, the European Commission ambitions the proposal to be implemented as quickly as possible and to be fully operational by the 1st of January 2021. Hence, the European Commission counts on the quick agreement of the EU Member States.

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