Although Great Britain is no longer formally a member of the European Union, until the end of 2020 there is a transitional period in which Great Britain is treated for tax purposes as a member of the Union.
At the moment, the European Union has not concluded an agreement with Great Britain that would regulate mutual relations after 2020. Therefore, from the tax point of view, it is worth determining what the tax settlements will look like from the new year.
- Great Britain will be treated as a third country, therefore goods transactions within Great Britain will be treated as exports and imports of goods. These transactions have other than EU rules of documentation, the emergence of a tax obligation or the tax base.
- There is an exception to this rule for goods transactions with Northern Ireland – they will continue to be treated as EU transactions (intra-Community supply and intra-Community acquisition). Northern Ireland taxpayers will use the “XI” designation for their EU number. This situation is to last 4 years with an option to extend it.
- It will not be possible to use the call-of-stock warehouse procedure.
- British entrepreneurs registering for VAT in Poland will be required to appoint a tax representative in Poland. At the moment, however, the Ministry of Finance has not specified whether it will require it from entities that were registered before December 31, 2020.
- These entities will also not recover Polish tax in the VAT-refund system. The refund will only be possible if the reciprocity condition (UK tax return) is met.
- There will no possibility to apply the distance sale mechanism, however, the TAX FREE travel tax refund system will apply.
- If goods are shipped before the end of the year and ended after the end of the year, the current rules will apply.
- Until the end of 2025, corrections to activities performed before the end of 2020 will be applicable according to the current rules. For example, a 2020 delivery transaction adjustment made in 2021 will be treated as an ICA adjustment.
Regarding the issue of income tax, it is worth pointing out that:
- As of January 1st 2021, withholding tax exemptions resulting from the implementation of EU directives will no longer apply to British entities.
- This means that it will not be possible to refrain from withholding tax on: dividends, interest or royalties on this base.
- Nevertheless, the provisions of the Polish-British Double Tax Treaty (DTT) will continue to apply.
- The DTT provides for the exemption of dividends from “withholding” tax in Poland, if the British beneficiary possess, on the dividend payment date, not less than 10 percent of shares (stocks) in the capital of the company paying the dividends and holds or will hold such shares for an uninterrupted 24-month period where the payment was made. In other cases, the tax is 10%.
- Conversely, the withholding tax rates for interest and royalties are 5%.