BACKGROUND

The United Kingdom (UK) left the European Union (EU) on February 1, 2020, with a transitional phase during which EU law will continue to apply in and vis-à-vis the UK. The transitional phase stipulated in the withdrawal agreement ends on December 31, 2020, meaning that the UK will be a “third country” from January 1, 2021 and thus no longer part of the internal market and customs union.

WHAT DOES THIS MEAN FOR COMPANIES AND PRIVATE INDIVIDUALS?

Irrespective of the outcome of the negotiations on the future relationship, the EU’s relationship with the UK will undergo a fundamental change at the end of the year and will differ substantially from the UK’s membership of the internal market of the EU. This applies, for example, to the movement of goods, the customs formalities that will then be required, product certification and many other aspects, data protection requirements, services and mobility in general. Businesses and private individuals must therefore prepare for the end of the transition phase in any case – regardless of whether or not an agreement on the future relationship is reached by then.

A checklist (in German language) of the European Commission for the preparation of the Brexit for companies doing business with the UK can be found here.
From a tax point of view, the treatment of the UK as a third country has the following selected implications for companies and individuals:
  • Valued-added tax (VAT)
  • Duties
  • Certain cross-border distributions of profits (e.g. subsidiary to parent company)
    Cross-border transformations and restructuring
  • Transfer of capital gains (§6b German Income Tax Code)
  • Trade tax (nesting privilege no longer applies)
  • Inheritance and gift tax (benefits and tax exemptions may not apply)
  • Exit taxation
We would be happy to analyze the tax and financial implications of the Brexit for your company and private situation.

Sources: Federal Ministry of Economics and Energy (BMWi) and European Commission

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Disclaimer: We assume no liability for the accuracy of the information. The information listed here does not constitute recommendations for action.