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07-02-2020

Brexit: where do we stand tax wise?

After many years of lengthy political struggles and harsh negotiations between the United Kingdom and the European Union, the Brexit has become official on 1 February 2020.

In order to ensure an uncluttered exit of the United Kingdom from the European Union, both parties have concluded a transitional agreement wherein the United Kingdom will be treated up till 31 December 2020 as it would (still) be a member state of the European Union. The citizens of the United Kingdom will also (still) be treated as an EU-citizen along with the rights that are assigned thereto.

The Dutch State Secretary of Finance and Taxation has published an explanatory decree in regard to Dutch tax consequences of this transitional agreement. According to the transitional agreement European law remains applicable in full at least up till 31 December 2020. This means that European law, directives, regulations and European Court of Justice case law are still applicable in the United Kingdom during this transitional period.

The decree describes a number of Dutch tax consequences of this transitional period, for instance;

  • United Kingdom citizens may still apply during the fiscal year 2020 for the qualifying foreign taxpayer regime, provided that all requirements are met;
  • United Kingdom citizens remain entitled during the fiscal year 2020 to Dutch employment and combined income-related allowances, provided that all the requirements are met;
  • Employers may during the fiscal year 2020 still apply the special arrangements in regard to anonymous tariff and the identification procedure to United Kingdom citizens;
  • Dutch resident taxpayers that have a permanent establishment in the United Kingdom may still apply the Dutch participation exemption during the fiscal year 2020;
  • The Dutch arrangements in regard to cross-border Dutch corporate income tax fiscal unities with a top or intermediate holding company in the United Kingdom during the fiscal year 2020 still apply;

For the sake of completeness’ we note that the European customs and value added tax rules will also still apply at least up till 31 December 2020. This seems to be of great significance for importing and exporting companies that are conducting business from and to the United Kingdom and the European Union.

Also, previously published Dutch (national) transitional arrangements are no longer relevant, since the transitional agreement concluded between the European Union and the United Kingdom has direct effect in the national legal order and subsequently does not have to be implemented and ratified by the Dutch parliament. 

Whether European and Dutch taxation laws, regulations and arrangements will still apply after 31 December 2020 is not clear yet. Whether an extension is envisaged by both parties will become clear in the course of this year. The Prime Minister of the United Kingdom has, however, already expressed that the United Kingdom wants to disentangle itself from the European Court of Justice as soon as feasible, therefore an extension of the transitional agreement and the Dutch explanatory decree seems rather unlikely.

The Dutch tax authorities pro-actively advise Dutch companies that are doing business in the United Kingdom to prepare for the period after 31 December 2020, since for instance as of 1 January 2021 customs formalities and proceedings may apply to import and export of goods between the United Kingdom and the European Union. 

We will keep you informed in case of any changes or updates in regard to the Brexit and Dutch tax legislation.

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