Brexit will affect Polish taxpayer’s ability to claim a refund of British VAT on expenditures incurred within the territory of Great Britain (and so it will affect Polish VAT refunds for British entities). Up until now, based on the EU directive, taxpayers of all the Member States were entitled to claim a refund of the tax charged on purchased products and services within all the European Union using a uniform procedure. The procedure provides that a taxpayer submits an application for a refund of the foreign VAT in an electronic form to his appropriate tax office, which, after the initial verification, passes on the application to the tax administration of a relevant country. Within several months after submitting the request, the taxpayer receives the tax return onto his bank account.
After Great Britain’s leave, the VAT refund procedure for foreign entities remains under previously binding rules. However, it only does until the end of the transitional period. What it means is that the British VAT reclaims will only be possible on expenditures incurred until 31st December 2020. Furthermore, according to the agreement, the VAT refund applications must be submitted until 31st March 2021, which is a significant derogation from the generally binding deadline (usually, the applications are submitted until 30th September of a given year for a previous year). After the transitional period, reclaiming British VAT might not be as simple (if possible at all). First of all, what should be considered is that VAT refunds between the EU Member States and third countries (which Great Britain will become) are generally carried out based on reciprocity, i.e. if a given third country allows for claiming VAT refunds for entities from a particular Member State, then the Member State allows for claiming VAT refunds for taxpayers from the same third country. As can be seen, national authorities’ discretion applies in this case, and there is no general rule for third countries to use the same principle.
What appears likely is that Great Britain will continue to cooperate with the EU in terms of VAT returns and that Polish taxpayers will still be able to reclaim VAT charged on expenditures incurred in GB. It should, however, be assumed, that the procedure might not be as much taxpayer-friendly (current simplicity results from significant harmonisation of regulations within the EU). The general principle is to submit the applications directly to the tax administration of a third country, which implies a necessity of understanding the rules applicable in that country, using local forms and a language. The details depend on the kind of solution Great Britain will decide to adopt. Check our service Tax Advisory https://europe-tax.com/services/tax-advisory/