Brexit and its practical impact on taxation


The UK’s two-year deadline to negotiate EU exit conditions and establish a relationship with other Member States will end on 29 March 2019. After the British Parliament did not approve the treaty about step out, there are several possible Brexit scenarios.

We will not look at the tax implications of a so-called hard Brexit in which Britain will leave the EU without a deal.

  1. Indirect taxes

After Brexit, Great Britain will become the third country without any customs relief from the point of view of the EU. Imported and exported goods will be subject to standard customs clearance and, if applicable, customs duties. In terms of VAT, it will no longer be possible to apply simplifications to the trilateral trade or to use the Mini One Stop Shop for electronic services. When providing services, the place of delivery may change.  Consequently, the service provided may lead to obligatory UK VAT registration.

  1. Direct taxes

A hard Brexit will also hit this area; European directives will cease to apply. For example, the payment of profit, interest or royalties between the parent company and the subsidiary will be subject to withholding tax under a double taxation treaty that will remain in force. However, simplification procedures and exemptions under the Merger Directive for cross-border transformations will not be possible.

  1. Taxation of natural persons

On 6 March 2019, a so-called Brexit Law was delivered to the president to mitigate the negative effects of a hard Brexit on individuals. A UK tax resident will be able to claim non-taxable parts of the tax base and tax credit as a regular resident of the EU in case of a hard Brexit. The law also deals with issues related to the legalisation of residence and access to the labour market for British citizens in the Czech Republic.

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