EU To Amend VAT Rules For Trade With Northern Ireland

by Ulrika Lomas, Tax-News.com, Brussels

07 August 2020

The European Commission has proposed changes to the EU's VAT rules in respect of Northern Ireland, in preparation for the end of the Brexit transition period with the UK.

The proposed amendment to the EU VAT Directive would introduce a special identification number for businesses in Northern Ireland. This would mean that EU VAT provisions can be properly applied to goods, in line with the Protocol on Ireland/Northern Ireland, agreed as part of the Withdrawal Agreement on the UK leaving the EU.

Under the Protocol, EU VAT legislation will continue to apply when it comes to goods traded in Northern Ireland. Goods sold and transported from Northern Ireland to the EU, and vice versa, will be treated the same as cross-border supplies of goods within the EU, including for VAT exemptions and deductions.

These provisions will not apply to supplies of services in Northern Ireland, which will be subject to UK VAT rules after the transition period ends. Supplies of goods and services made elsewhere in the UK will also be subject to UK rules for VAT.

The Commission said that these changes to the VAT Directive will require some IT adjustments from member states. It urged member states to rapidly agree to the proposal, so that it can be implemented as quickly as possible.

The VAT provisions in the Protocol are due to enter into force on January 1, 2021.

Work is ongoing on similar legal changes in the field of excise duties.

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