In the referendum held on 23 June 2016, the United Kingdom voted
in favour of exiting the European Union. Although the exit will not
come into effect for another two years, consideration should be
given to the tax implications that may arise, especially with
regard to customs, excise and value added taxes.
Transactions between the United Kingdom (UK) and the countries
of the European Union (EU) are currently considered to be
intra-community transactions, with an obligation to pay VAT
(through a reverse charge mechanism) on assets sent and received.
This allows for the free movement of goods, and the situation is
similar for the provision of services.
After Brexit, the sale and purchase of assets between Italy (or
other EU member countries) and the UK will no longer be considered
intra-community transactions. Instead, assets shipped from Italy to
the UK will be classed as export supplies, while incoming goods
from the UK will be classed as imports.
With regard to the provision of generic services pursuant to
Article 7-ter of Presidential Decree 633/72, formal
requirements will change. Services provided should therefore be
identified as "not subject to" transactions. With regard
to services received, the Italian taxable entity will be required
to apply the reverse charge mechanism, issuing a self-billing
invoice. Completion of the invoice received from the British
service provider will no longer be necessary. In addition, it will
no longer be obligatory to declare the transactions on the
Intrastat summary lists pursuant to Article 50, paragraph 6 of Law
Another consequence of Brexit will be the loss of the
simplifications that are currently applied among the EU member
states. Entities established in the UK will therefore be able to
identify themselves as non-resident entities for VAT purposes in
Italy only through the appointment of a tax representative in
accordance with Article 17, paragraph 2 of Presidential Decree
633/72 and no longer through the identifying procedure set out in
Article 35-ter of Presidential Decree 633/72.
It is likely that a similar situation will arise when a taxable
Italian entity intends to operate in the UK. It should be noted
that, in the future, a British entity that purchases assets in
Italy and subsequently resells them to another Italian taxable
entity, not creating any domestic tax position, will need to go
through a process to recover the VAT paid on the purchase. This
process will be much more cumbersome than that which is currently
in place for member states.
Some repercussions are also foreseen in e-commerce where, in the
case of direct e-commerce, the British operator must necessarily
appoint a tax representative in one of the member states. Another
consequence will be the loss of the right of Italian economic
entities to request a refund for taxes paid in the UK (the
non-resident tax refund in accordance with Article 38-bis
of Presidential Decree 633/72).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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