Brexit: list of questions and answers for the professionals
The DGFiP provides you with answers on the tax consequences of the new relationship between the United Kingdom and the European Union.
1- I sub-contract my research expenditure to a British research organization, can I still benefit from the CIR for this expenditure?
These expenses will no longer be admissible for the tax credit in favor of research (CIR).
In fact, only subcontracting expenses carried out by the accredited public or private service providers established in France, in a Member State of the European Union (EU) or a member of the European Economic Area (EEA) that has signed an administrative assistance agreement with France to prevent tax evasion and fraud can be taken into consideration in the RTC base. Research expenses charged by a French company to a subcontractor established in a foreign country are not included in the tax credit base.
2- A British company is part of the capital structure that allowed the constitution of a consolidated group. Can the group still profit from the tax integration regime? If not, what are the consequences at the group?
The British companies will be considered as established in the EU for financial exercices started before the 31st of December 2020.
After the date of the closure of these financial exercices-if
the UK company is qualified as a non-resident mother entity, the group will stop, causing all the consequences of a group closure, unless a foreign company ( in the sense of the tax group regime and which fulfils the conditions of it) is substituted as the new non-resident mother entity
– if the British company has the status of a foreign company, all its affiliates and sub-affiliates will leave the group, causing all the consequences of leaving a member of the group;
– if the the British company has the status of an intermediate company, all its affiliates and sub-affiliates will leave the group, resulting all the consequences of the exit of a group member.
The tax groups have, in certain conditions, the possibility to prevent or reduce these consequences, by re-classifying within the group the titles of the involved subsidiaries, by changing the form of their option for the regime, or by making the mother company be assumed by a member of the group which constitutes a new mother company.
3 – A British company sends dividends to its French mother company. Will these dividends always still get benefit from the tax exemption in France (mother-affiliate regime)?
The mother-affiliate regime, which offers the exemption of earnings of participations that fulfill certain conditions, is not dependent on the establishment of the distribution affiliate in the EU ( outside of the state and Non-cooperative territories on tax issues), the French mother company receiving income from a British affiliate will not be deprived of the benefit of this regime just because of the Brexit.
However, the quota of the charges and expenses (which is included in the result of the company benefiting from the exempted participation products) is calculated at the reduced rate of 1% when the distributing affiliate is liable to a tax equivalent to the corporation tax in a Member State of the European Union and when it fulfils, with the company which receives this distribution, the conditions which would allow them to be a member of the same tax group if this affiliate were established in France.
In this situation, proceeds collected during the fiscal exercices started before the 31st of December 2020, due to a participation in a British company, will be considered as originating from a company established in the European Union.
After the end of these fiscal exercices, the proceeds from participations which are eligible for the mother-affiliate regime and coming from affiliates located in the United Kingdom will result the application of a quota of charges and expenses calculated at a rate of 5%.
4 – Within a group, what will be the deduction rate applied to dividends paid by a French company to a British company after Brexit?
The British companies will no longer be able to profit from the tax exemption on French source dividends stipulated in particular under the condition of a minimum holding requirement of 10% or 5% depending on the case. However, it will be admissible that this exemption of the retention at source applies to all the distributions paid during the fiscal exercice started before the 31st of December 2020 by a French company to its British mother company, under the respect of the other conditions mentioned in the article 119 ter of the CGI
After the closure date of this fiscal period, except in particular cases, two situations should be distinguished:
– In the case of dividends payable by a French company to a British one which owns, directly or indirectly, less than 10% of the capital of the French company, the retention rate cannot be higher than 15% in application of the tax agreement between France and the United Kingdom of 19 June 2008;
In the case of dividends paid by a French company to a British company which owns, directly or indirectly, at least 10% of the capital of the French company, no deduction of withholding tax will be due in France in accordance with the agreement.
5 – I am a French company and I import/export goods to and from the UK. What consequences does the Brexit have in this field?
Since the leaving of the United Kingdom from the European Union, you carry out imports/exports from or to a foreign country.
Unlike intra-Community transactions, the import and export transactions require specific declarations to be filled out at the Customs and Excise administration at the time of the import or export of the goods. On the export side, the tax exemption must be justified in accordance with the provisions of Article 74 of Annex III to the General Tax Code. On the import, the tax must be determined in accordance with the provisions of article 292 of the same code and settled in accordance with the stipulations of article 1695 of the same code.
6 – I am a French company and I carry out transactions subject to VAT in the UK. What are my procedures after the Brexit?
You need to register and pay the VAT due in the UK to the UK authorities. The procedures and formalities to be completed are the exclusive competence of the British tax administration.
7 – I am a French company and I do not carry out taxable operations in the United Kingdom. How do I apply for a VAT refund from the UK administration?
Two situations should be distinguished:
– if the request relates to expenses incurred before 31st December 2020, you must register your demand before 31st March 2021 on your professional zone on the website www.impots.gouv.fr. Your request will be transmitted by the DGFiP for processing and reimbursement to the UK. You should make sure that you provide all the necessary documents to process your request for reimbursement;
– if the request is related to expenses incurred after the 31st of December 2020, your VAT refund request will have to be sent directly to the UK tax administration according to a procedure that will be set by the UK legislation. There will no longer be any exchanges between the DGFiP (Member State of establishment of the claimant) and the UK tax authorities (HM RC).
8 – I am a company registered in the French VAT Mini-Guichet (MOSS) and I have already settled British VAT with this Mini-Guichet, what should I do after the Brexit?
You will have to declare and pay via the French MOSS before the 20th of January 2021 the VAT due in the UK on services provided before the 31st of December 2020.
Taxes related to transactions taxable in the UK from 1st January 2021 can no longer be paid via the mini-guichet but will have to be declared and paid directly to the UK authorities according to the modalities set by the UK.
9 – I am a British company without a permanent establishment in France and I have VAT obligations in France, do I need to nominate a tax representatif?
You will not be required to designate a fiscal representative to pay the VAT. Your file will be treated with the Foreign Business Tax Service of the Non-Resident Tax Department.
10 – I am a British company with no permanent establishment in France and which does not carry out any transactions liable to VAT in France. How do I apply for a VAT refund after Brexit?
Do I need to designate a tax representative to claim a VAT refund after Brexit?
A refund of deductible value added tax (VAT) on expenses incurred after 1st January 2021 can, as at present, be claimed from the VAT refund department of the Non-Resident Tax Directorate (DIN R).
However, the procedure for VAT refunds changes.
Indeed, the VAT relating to goods and services acquired in France for the needs of his economic activity by a taxable person established in another Member State of the European Union (EU) can, under certain conditions and according to certain modalities, be the subject of a refund. The refund is then dependent on the fulfilment of conditions related both to the taxable persons themselves (they did not have in France the seat of their economic activity or a permanent establishment from which the transactions were carried out or, if not, their domicile or habitual residence) and to the transactions they carry out (they did not carry out supplies of goods or services located in France), and follows a procedure based on the setting up of an electronic portal in each Member State
From the 1st of January 2021, the UK company will operate under the provisions of the thirteenth Council Directive 86/560/EEC of 17 November 1986, which provides for refunds to taxable persons established in a country outside the EU on a different basis to that provided to taxable persons in the European Union. Like the refunds for taxable persons established in the EU, the refund is subordinated to conditions related to the situation of the taxable persons and the transactions carried out. Refunds to taxable persons established outside the EU follow a specific procedure which is characterized in particular by the obligation for taxable persons established outside the EU to designate a taxable representative established in France who agrees to complete the administrative formalities on their own behalf.
Thus, you will be required to nominate a fiscal representatif to apply to the tax administration for a VAT refund in accordance with the terms of the thirteenth directive 86/560/EEC of the Council of the European Communities of 17 November 1986.
11 – I am a UK company with no permanent establishment in France that has withholding tax obligations in France, do I need to appoint a tax representative?
The article 173 of the law n° 2019- 1479 of 28 December 2019 of the Finance Act for 2020 extends the scope of the exemption from the obligation to appoint a tax representative for the withholding tax operated by debtors established outside France under the conditions provided for in Article 1671 of the CGI to debtors established “in a non-EU Member State with which France has a legal instrument relating to mutual assistance similar in scope to that provided for by Council Directive 2010/24/EU of 16 March 2010 on mutual assistance for the recovery of claims related to taxes, duties and other measures and by Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in the field of value added tax. The list of these States is determined by order of the Minister in charge of the budget.
As the United Kingdom has legal instruments for assistance in recovering and the fighting against tax fraud similar to those existing between EU member states, British operators will be exempt from appointing a tax representative.
12 – I am a British company without a permanent establishment in France and I have a French intra-community VAT number, do I have to change my number after Brexit?
There will be no change to your French VAT number. If you no longer carry out taxable transactions in France requiring the maintenance of this number, you must inform the foreign business tax service of the Non-Resident Tax Department (DINR) so that the number is invalidated.
13 – I am a non-UK supplier who dispatches packets valued at less than £135 to UK end Consumers, what are the consequences of Brexit?
For deliveries of certain packets to customers in the UK, new rules have been applied since 1 January (“For imports of goods from outside the UK in consignments not exceeding f 135 in value”).
These rules are meant to treat EU and non-EU goods in the same way in order to facilitate the collection of VAT on imported goods by ensuring that foreign sellers actually pay the VAT due.
As a result:
- marketplaces that facilitate sales, are now liable for UK VAT including on inter-business sales with a value of up to f135. However, where the business customer is registered for VAT in the UK and provides their valid VAT registration number to the seller, the VAT will be recognised by the customer through a reverse charge.
- Companies that sell products directly to UK consumers from a distance (without the use of a marketplace) from outside the UK will also have to pay VAT. As of 1 January 2021, the distance selling minimum threshold for sales from EU member states no longer applies.
- As a result, from 1 January 2021, companies established outside the UK that become liable for VAT in the UK under the above regulations must register for UK VAT with no registration trigger.
14 – I carry out some services for a British client, what are the consequences of Brexit?
The provision of services to a professional based in the United Kingdom:
Since 1 January 2021, you have been providing services between parties in a country outside the European Union. Consult the territoriality rules applicable to your case “Supply of a service by a taxable person established in France (sale by a French supplier)” on our online space in order to understand the consequences for your situation:
As a matter of principle, since these are services between parties, the performance of a service by a party established in France for the benefit of a party based outside the European Union is not subject to French VAT.
The French supplier prepares an account without VAT. It includes the mention “VAT not applicable – art. 259-1 of the CGI” if the customer is a taxable person established outside the EU.
A taxable person established in France who provides a service to a non-taxable person (a person) is subject to French VAT. The location of his private customer in or outside the European Union is irrelevant. https://www.impots.gouv.fr/portail/professionnel/prestations-aux-non-assujettis
15 – I buy services from a British supplier:
The services between taxable persons are liable to VAT at the place of taxation of the customer, which is France.
According to article 283 (2) of the CGI, when the services mentioned in article 259 (1) of the CGI are supplied by a taxable person who is not established in France, the tax must be paid by the customer of this service. Therefore, invoices issued by the British supplier without a permanent establishment in France do not have to include VAT.
For services provided to a non-taxable person, the place of taxation is in principle that of the supplier.
However, for services to non-taxable persons, there are numerous exceptions which you can consult here: https://www.impots.gouv.fr/portail/professionnel/prestations-aux-non-assujettis
16 – I carry out transactions of exchange of goods with Northern Ireland:
The exchange of goods between Northern Ireland and the member states of the European Union are still considered as intra-Community exchanges and this for a period of 4 years from 1 January 2021.
17 – How to proceed to check a UK VAT number, via the VIES application accessible via the Internet, after BREXIT?
As of 1 January 2021, it will no longer be possible to check the validity of a UK VAT number on the European Commission’s VIES website (http://ec.europa.eu/taxation customs/vies/).
18 – I am using the UK’s mini VAT office (MOSS), what should I do after Brexit?
If you are currently identified for MOSS in the UK and would like to take advantage of the simplification it offers to companies, you will be able to use the electronic service set up for taxable persons not established in the EU by registering on the portal of an EU Member State.
Otherwise, you will have to make your procedures directly with each Member State of consumption concerned. For France, you will have to contact the foreign companies’ tax office of the Direction des impôts des non-résidents.
19 – Can I keep donating to British non-profit organizations (NPOs) and still get the sponsorship tax credit?
Donations and payments made to nonprofit organizations (NPOs) whose seat is located in the United Kingdom will no longer be eligible for the tax reduction for sponsorship.
As a reminder, the only eligible foreign organizations are those whose seat is located in a Member State of the European Union (EU) or in another State party to the Agreement on the European Economic Area (EEA) which has concluded an administrative assistance agreement with France to combat tax fraud and evasion, under the terms of Article 238 bis of the CGI.
20 – I am an institution for collective investments (UCI) created on the basis of United Kingdom law that fulfils the conditions set out in 1° and 2° of article 119 bis of the French General Tax Code to be exempt from deduction of withholding tax on the products referred to in the same article 2: how can I take advantage of this exemption at source?
From 1 January 2021, UCIs governed by United Kingdom legislation are likely to benefit from the exemption from withholding tax stipulated in article 119 bis (2) of the French General Tax Code as UCIs governed by the legislation of a State which is not a member of the European Union and which is related to France by an administrative assistance agreement in order to prevent tax fraud and tax evasion. The respect of the condition for the exemption of the UCI relating to the existence of such an agreement supposes the effectivity of the stipulations related to administrative assistance: the implementation of the latter must allow the tax authorities to obtain from the British tax services the information necessary for the verification of the compliance of a UCI with the conditions set out in the first and second paragraphs of article 119 bis of the French General Tax Code.
UCIs which estimate that they have fulfilled all the conditions stipulated by the law and mentioned in paragraph 40 of BOI-RPPM-RCM-30-20-70 may request their financial institution to refrain from deducting the withholding tax. It is up to them to provide for this purpose the information enabling the paying institution to ascertain compliance with the conditions for exemption required by the law.
In this context, UCIs founded before January 1st , 2021 which have already benefited from the exemption at source before this date may profit from this exemption by simply presenting to the paying institution the BOI-FORM-000089 form including the certificate on honour of their representative or their management company that the UCI continues to fulfill all the conditions required to be exempted from withholding tax. This practical solution in terms of proof applies whatever the date of the last distribution to the benefit of the UCI exempted from withholding tax.
The filing of this form will enable the UCI to obtain the application of the exemption from withholding tax by the Payer Institution in a simplified way as long as its situation is not modified regarding the conditions of exemption. Consequently, it will be up to the UCI, in case of a change in its situation, to inform the paying institution accordingly.
The filing of a single BOI-FORM-000089 form will allow to justify the request for exemption of all distributions of a certain year to the benefit of the UCI, it being the responsibility of the latter to inform its paying institution before a distribution if its legal situation is modified during the year and no longer allows it to benefit from the exemption.
The UCIs to which a retention at source would have been applied during the first months of the 2021 year may request its refund by the paying institution by justifying that they satisfy the conditions for exemption. The restitution is then made by the payer institution by means of a charge or reimbursement of the overpayment according to the same principles as those stipulated in § 120 to 160 of the BOI-INT-DG-20-20-20 for the application of the agreed rates of withholding tax.
source. For this purpose, UCIs governed by United Kingdom legislation file form B01- FORM-000089.