Importing From the UK After Brexit: Article 23 Permit
As of 1 January 2021, when Brexit will take effect, the UK will no longer be a part of the EU’s customs union. As a result, VAT will be due on import, in addition to any customs duties. The VAT due on import and any customs duties must be paid to Customs authorities when you submit the import declaration. The VAT paid upon import can be reclaimed at a later date as input VAT (if you are entitled to deduct VAT) on the regular VAT return.
This means that you actually pay this VAT in advance and only get it back at a later date. This is a disadvantage for liquidity. You can prevent this by using a so-called Article 23 permit.
What is an article 23 permit?
With an Article 23 permit you do not have to pay the VAT owed on import to Customs. You declare this on your regular VAT return. If you are entitled to deduct VAT, this VAT can immediately be deducted in the same return. This means you do not have to pay the VAT in advance. This is interesting for entrepreneurs who regularly import goods from the UK and other non-EU countries.
An Article 23 permit must be applied for in writing. Apply for this as soon as possible to be able to use the permit starting 1 January 2021.
Conditions for Article 23 Permit
For an article 23 permit a few conditions apply:
- You live as an entrepreneur in the Netherlands or are established there;
- You regularly import goods from non-EU countries;
- You keep records that show how much VAT you have to pay upon import.
If you do not meet the first condition, you can apply for an Article 23 permit through a fiscal representative.
Processing in the VAT return
If you are in possession of an Article 23 permit, you must declare the VAT due on import on the regular VAT return as purchases from countries outside the EU. You can then deduct this VAT as input tax. Of course the latter only applies if you use the imported goods to perform VAT-taxed activities.
Using an Article 23 permit ensures that the VAT no longer has to be paid in advance and can only be reclaimed as a deduction for input tax at a later time. That way, working capital is saved by transferring the VAT due on import to the VAT return.
Please note: For Northern Ireland there is a separate arrangement in the Brexit Withdrawal Agreement whereby the import of goods will still be regarded as intra-community trade after 1 January 2021. An Article 23 permit for Northern Ireland is therefore not required.
Do you have any questions about Article 23 permit or do you want to apply for it? Please contact Crowe Peak’s VAT specialists. We are happy to help you.