Filenews 6 December 2020 - by Evagoras Prokopiou
The transition period for the UK's withdrawal from the EU ends on 31 December 2020. Until then, EU law continues to apply in the UK and so the country continues to be part of the internal market and customs union. At present, the EU and the UK are in the process of negotiating a free trade agreement, which, as the deadline approaches, intensifies. If by the end of 2020 there is no agreement on the future relationship between the two parties or if no extension of the transitional period is agreed in 2021, the UK will be treated as a non-EU country for tax, tariff and customs purposes.
With a view to the end of the transitional period, there are two scenarios on the table, according to the Customs Department of the Republic, with regard to the duties to be imposed. One scenario is about the absence of a deal (the so-called hard Brexit) and the second is about the case of an agreement.
As provided for in Article 47 of the Withdrawal Agreement, the movement of goods which has started to and from the UK before the end of the transitional period and is completed after it shall be treated as intra-Union movement. The customs status of the goods in question as Union goods, as well as the fact that the movement began before the end of the transitional period, must be demonstrated for each movement. Proof of the commencement of movement shall be provided by means of a transport document relating to the goods. In these cases, there will be no differentiation in customs procedures and they can be completed without the payment of import duties and VAT to the Cypriot State.
Two options for 1/1/21
But what will apply to goods exported to and from the United Kingdom from 1 January 2021 onwards?
- According to the Customs Department, in the event of a free trade agreement there is a possibility of granting preferential tariff treatment to specific goods, i.e. zero or reduced import duties will be paid on goods originating in the UK when they are released for free circulation in the EU and on goods originating in the EU when they are imported into the UK.
- If a free trade agreement is not reached, the goods will be subject to a general duty rate applicable to all third countries, in accordance with the EU Common External Tariff.
Regardless of whether or not the free trade agreement is reached, imports of goods from the UK will be subject to the provisions of the Value Added Tax Act, i.e. VAT will be paid on importation, in accordance with the rate corresponding to each commodity.
However, the United Kingdom has submitted written proposals, (02/12), in relation to rules relating to customs of plant and agri-food products and the recommendations are examined by the Commission. The Commission's chief representative, Mina Andreeva, said the proposals were being considered at the technical level, and discussions would also take place at the political level. The extension of the transitional period has also been hotly debated on the table. If there is an agreement on an extension, the above dates on the UK's product tariff framework will also be changed.
