Any country part of the EU is subject to all the rules and processes as set out in the EU VAT Directive. This allows businesses in the country to take advantage of all the benefits of the single market and the special allowances given to EU companies trading in other countries.
When the UK voted to leave the EU in June 2016 (“Brexit”), it created several questions regarding how businesses would be impacted from a VAT perspective.
It is impossible to predict what new VAT agreements will be negotiated as part of Brexit, so there can be no specific guidance given until any new VAT laws are drafted. However, it is important to note that the process of leaving the EU takes two years, and the UK does not intend to invoke Article 50, which formally triggers the exit process, until 2017.
This means that for 2017 and 2018 at least, there will be no changes to the VAT compliance obligations of UK companies, or for foreign companies trading in Britain. It is always widely believed that both the UK and the EU will be keen to ensure that all the rules which currently govern VAT treatment will still be applicable even when the UK leaves the EU.
Therefore, UK businesses trading with the EU and all businesses trading with the UK should continue to adhere to the EU VAT directive and make all business decisions based on the assumption that these rules will continue to apply.