VAT Brexit? Not in 2020
On 31 January 2020 the United Kingdom left the European Union on the basis of an agreement with the EU. There will not be a hard Brexit. The transition period will last for the next 11 months, through the end of 2020. The UK will still participate in the common market and the customs union, and regulations in this respect between the EU and the UK will remain unchanged in that period. From the perspective of businesses, it will be crucial to use the next few months to prepare for exit from the customs union.
No turbulence for now
After the transition period, a business from the UK subject to VAT registration in Poland and wishing to perform VAT-able activity in Poland will be required to appoint a tax representative, without which it will not be able to settle VAT.
Tasks of tax representative:
• Perform the business’s obligations for settlement of VAT (preparing tax declarations and summary information)
• Maintain and store documentation, including records for settlement purposes
| Existing rules and transition period|
Beauty XYZ, a firm based in the UK, acquires cosmetics in Poland which it then resells in Poland and to other EU member states (as intra-Community supply of goods). Consequently, Beauty XYZ is required to:
• Register for VAT in Poland
What about operations in Poland from 1 January 2021?
As of the law in force on 1 February 2020, if Beauty XYZ wishes to continue operating in Poland after the transition period, it will be required to conclude a tax representation agreement.
The tax representative is jointly and severally liable with the entity from the UK (here, Beauty XYZ) for the VAT obligations which the tax representative settles for and on behalf of the UK entity.
Extension of the transition period?
Meanwhile, it is hard to predict how Polish lawmakers will act following the end of the transition period. Among other issues, it is unclear whether interim regulations will be introduced for entities from the UK, or whether they will immediately be required to appoint a tax representative. In the worst-case scenario, UK entities may even be removed from the Polish VAT register. This is because a condition for VAT registration by entities from third countries is to appoint a tax representative. If you operate in Poland and do not wish to be removed from the VAT register, you will need to file a tax representation agreement with the relevant tax office.