34 (129) 2018
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Finance & Financial Services

Trading between Poland and the UK? Get ready for Brexit

by Marcin Majewski, manager, PwC
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Despite hopes or doubts, Brexit is seen to be inevitable; companies should start their preparations now. The biggest impact from the tax perspective will result from customs duties and VAT.

The formal exit date is within 11 months, however, the recently reached transitional deal agreement give hope to many decision-makers that there is plenty of time left. The transitional period may last until December 2020, but that is not quite so sure it will be so. If there is no Withdrawal Agreement reached in the run-up to March 2019, there will be a so-called 'hard Brexit'.

Regardless of the exact date, if we assume we have a year or more, for many companies on both sides of the Channel, suppliers and receivers, producers and traders, and for services too, there will be disruption and change. The more preparation that is done now, the more likely it will be for business partners that though the changes may be big, disruption will be minimised.

Trade after Brexit will more difficult, even if the EU and UK do reach a broad and deep agreement. Quoting President Donald Tusk: “…because of Brexit we will be drifting apart. In fact, this will be the first FTA in history that loosens economic ties, instead of strengthening them. Our agreement will not make trade between the UK and the EU frictionless or smoother. It will make it more complicated and costly than today, for all of us. This is the essence of Brexit.”

Customs Union

One of main aspects of the EU is that we are the largest free trade area in the world. Member states have fully aligned their customs policies, opening markets to each other and trading with third countries 'as-one'. But now, the UK will become a third country for EU states. So movement of goods will become restricted in a similar way as it is with Switzerland, Russia, China or the US. Let's  consider customs duty first. In a  hard Brexit scenario, movement of goods to and from the UK will be considered as import and export and charged with standard duty rates. That is a direct cost for companies. However, it is likely that within the Withdrawal Agreement there will be some sort of preferential customs tariffs implemented, so perhaps some of goods will have a reduced or 0% duty rate from December 2020.

Still, even if the duty rate is a zero, each movement of goods to andfrom UK will no longer be considered as an intra-community movement; after Brexit they will become imports and exports, in the full meaning of those terms – effort, time and risks. With customs authorities involved, companies will need to prove country of origin, customs value, specify exact customs tariff code etc. For many companies, that may be a new experience, having to take on tax and customs representatives, employing new specialists. For all companies, that will be burden that is yet hard to estimate.

VAT and excise

Considering this change from intra-community movement (acquisition or supply) to cross-border transit (import or export), there will be major changes in the process of handling and settling value-added tax. The regulations are complex. VAT is in part streamlined by EU law, and thus Brexit will require the UK to introduce new regulations.Businesses need to understand the flow of goods and all the chains that they are involved in. After careful analysis we may find that many supply chains may need to be reconstructed to meet the fact that the UK is no longer part of the Community.

New agreements in trade and services may need to be concluded, including those with tax representatives or setting up tax warehouses and monitoring in future the UK regulations that will be diverging over time from law and jurisdiction within the EU.


As negotiations continue, there are still many unknown aspects of tax consequences.  Businesses should map out and validate their operational models, especially within their supply chains. Prepare for the worst case scenario, such as a hard Brexit in March 2019 and work back from there – the transitional period will come to an end soon enough.

Other aspects that need to be considered now and secured in the coming months are how to make customs clearance, how to pay duty and VAT, how to ensure adequate cash flow for VAT payment purposes and the ways to mitigate that impact, obtain permits (some take up to a year), review your business structure andengage your partners already at this point.

Preparations and analysis performed in advance are the key to securing smooth operation and minimise direct and indirect costs and burden. Being prepared empowers companies to secure their business and, especially in the first stressful months, avoiding changes and finding opportunities where others weren’t prepared to do so.

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