Trade and Cooperation Agreement
The new trade and cooperation agreement between the EU and the United Kingdom (UK) has been in force since 1 January 2021. There are currently still some questions regarding its implementation. However we would like to give you a short overview of the relevant points.
After 31st December 2020, the movement of goods with the United Kingdom (UK) will be subject to customs formalities. This means that the goods must be declared for the relevant customs procedure both on import and export and are subject to import duties (including customs duty and import VAT).
With regard to possible customs duties, the agreement contains an important exception: goods with preferential origin in the EU or the UK are duty-free. The condition for granting duty-free treatment is that the goods must either have been wholly obtained or produced in the economic area of the EU or the UK, or that the product-specific rules of origin of the agreement have been fulfilled. The only proof of origin is a reference on a commercial document. You should keep in mind that supplier’s declarations for materials and merchandise are generally required before the declaration of origin can be issued. Up to a value of goods of 6,000 €, this certificate can be issued by anyone. If the value exceeds the limit, only a “Registered Exporter” (REX) may issue this proof.
Another important exception is the special position of Northern Ireland. This is assigned to both the British and the European internal market due to the agreement. I.e.: Goods produced in the EU and Northern Ireland can still circulate freely between the EU and Northern Ireland, and goods produced in the UK and Northern Ireland can also circulate freely within these areas.
Taking into account this special status of Northern Ireland, a distinction must also be made between Great Britain and Northern Ireland for the VAT on the movement of goods. While Great Britain is also to be treated as a third country in this respect, Northern Ireland will be treated as belonging to the European territory for the VAT on the movement of goods even after 31st December 2020. It should be noted, however, that this special status of Northern Ireland applies exclusively to the movement of goods and is not applicable to services.
In summary, transactions carried out after 31. December 2020 (subject to any transitional arrangements) in trade in goods and services with Great Britain and in trade in services with Northern Ireland will be subject to the VAT rules applicable to the third territory, while in trade in goods with Northern Ireland the VAT rules applicable to intra-Community trade will apply.
In addition, the Common Transit Convention is maintained. Supplies transported over the land bridge to Ireland and Northern Ireland that meet the requirements of the Convention will continue to be recognized as intra-Community supplies, so there will be no change in this respect. Accordingly, no import duties are payable.
The sea route can also be used as usual.
It should be noted, however, that the hybrid status of Northern Ireland has a disadvantage. On the British side, there will be extensive controls in the Northern Irish ports to avoid the circumvention of customs duties for goods between Great Britain and the EU. It should therefore be noted that this may involve additional waiting time and costs.
Posting of employees
Another positive aspect is that persons who were already authorized to work or otherwise reside in an EU country or vice versa in the UK before 31. December 2020, will enjoy the same rights that applied before the final withdrawal. In order to be able to prove these rights in the future, it is mandatory to have a residence document, which can be obtained from the Foreigners’ Registration Office.
However, anyone wishing to post their employees to the EU or the UK after the cut-off date and that does not have a corresponding residence permit could in future be faced with the issue of applying for the relevant permits and work visas.
The following constellations are particularly conceivable with regard to the posting of employees:
- Irish companies employ UK employees and send them to Germany as part of a temporary provision of services. Such temporary postings of UK citizens by an employer based in the EU are then treated under residence law in accordance with the regulations on the freedom to provide services.
- The situation is different for Northern Ireland companies that employ people from the UK and want to send them to Germany. These do not benefit from the freedom to provide services because they are not based in the EU. Therefor the posting could face some hurdles on the German side. However, with regard to the temporary movement of natural persons for business purposes, the EU and the UK have agreed on a wide range of reciprocal obligations that allow companies based in the EU and the UK to post certain employees as intra-corporate transferees to an affiliated company based in the other party. As intra-corporate transferees are temporary migrants, the maximum duration of such transfers is limited to three years. With respect to UK nationals posted to the EU, this duration includes periods of mobility between Member States. This is in line with current EU practice with other third countries. The EU-UK agreement also facilitates the free movement of “contractual service providers” or “professionals” to provide services under certain conditions. Business visitors who do not provide services are also allowed short-term entry to perform certain activities.
- Of course, this also applies vice versa to German companies that are based in Germany and wish to send their German employees to the UK.
- Another scenario might be German companies which are based in Ireland that employ Irish and German employees and send them to the UK. While the posting of Irish employees between Ireland and Great Britain (Common travel area) will continue to be possible without any problems, this does not apply to employees with German citizenship. This is because this privilege is linked to Irish and UK citizenship. The posting of German employees will therefore also only be possible within a more limited framework and may also encounter restrictions. The above also applies in this respect.
In all cases, it is advisable to contact the relevant authorities in good time in order to apply for any work permits, visas or residence permits that may be required.
Do you still have any questions? Please do not hesitate to contact us.
We will gladly take over the communication with the authorities, accompany you with the corresponding applications and advise you on all questions concerning the movement of goods and services.
We would also like to remind you, that for any tradings with the UK you’ll have to submit customs documentation to Revenue from the 1st January. We can help you to manage all your customs documentations and any related tax requirements, such as accounting for VAT.