Consequences of Brexit

An Indirect Tax perspective

15 July 2016

Even though some time will pass before the UK will leave the European Union (“EU”) and it is not certain which model will be implemented post secession, there will clearly be quite some changes. This holds true from a tax perspective too. Especially for Indirect Taxes where VAT and customs legislation is largely harmonised, the long-term consequences and the associated systems impact could be quite substantial.

Legal framework

The Customs Union means customs duties are absent within the EU Customs territory, while Member States share common external tariffs with third countries. The Member States share a common VAT system governed by the VAT Directive.

The secession process – a negotiation about exit terms – triggered by the Brexit vote is likely to take at least several months and its outcome is quite uncertain. It may take up to two years before a secession agreement is reached, or longer if an extension of the negotiation period is agreed upon. Until then, EU laws and treaty obligations continue to have effect. However, article 50 of The Consolidated Treaty provides a Member State with the right to “withdraw from the Union in accordance with its own constitutional requirements”.

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