Ireland - Brexit and Taxation

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Ahead of drawing up the next Budget, officials from the Irish Finance Department have published a paper which includes a consideration on the implications of Brexit for Ireland's tax system.

It is felt that the impact of Brexit on direct taxation is likely to be minimal because the double taxation agreement between the two countries will continue as it is. It is thought that indirect taxes such as VAT and excise duties will feel the main impact.

When the UK leaves the EU, it becomes a third country for VAT purposes and all supplies to and from the UK will change from intra-Community supplies/acquisitions to exports/imports. This will involve a substantial initial administrative burden for businesses with systems development issues to deal with changed practices, the review of existing legal contractual arrangements and business models. EU simplifications, such as consignment stock and triangulation, which assist compliance in more complex supply chains will no longer be available to the UK and this could have a significant impact on the operations of Irish businesses engaging with UK businesses, depending on the outcome of negotiations.

In addition, the UK will have a great deal more flexibility in relation to what level of VAT to charge on supplies as it will no longer be bound by the restrictions on rates under the EU VAT Directives. Reduced VAT rates in the UK could in turn lead to increased cross-border shopping, particularly if combined with weaker sterling. All of this could lead to pressure to amend the VAT rates in Ireland.

If you require assistance with any EU or international VAT matters please contact us.

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