VAT One Stop Shop scheme for Northern Ireland
Changes in distance selling between EU member states and non-EU countries made a great impact on the existing methods of VAT tax settlement. In addition to modifications in tax law in Great Britain and Northern Ireland there are also new suggestions resulting from the introduction of VAT OSS which requires submitting tax declarations online.
The fact that the UK was no longer subject to the rules of intra-community trade raised a lot of questions. How has the situation of businesses with registered offices in Northern Ireland changed? What is the NI – EU trade relation like now? As it turns out, regulations concerning Northern Ireland and are being introduced at a different rate.
Changes in EU VAT regulations for non-EU countries
As of January 1, 2021 regulations regarding VAT for e-commerce traders have changed. The most considerable modifications concern not only Great Britain but also Northern Ireland. However, Northern Ireland is subject to a unique set of regulations in this regard. According to a dedicated protocol, Northern Ireland is partially subject to EU VAT regulations and partially treated the same way as Great Britain is - as a non-EU country. The main difference lies in the type of exchange conducted: the former has to do with selling goods, whereas the latter with providing services.
Entrepreneurs who sell their goods comply with the intra-community supply and acquisition transactions rules, as well as distance sales rules which are applicable in the EU. However, those who provide or receive services will have to settle VAT according to the same rules as businesses from outside the EU. These rules will apply for the next 4 years. The protocol offers a time extension for these rules, which means that these methods of VAT settlement may become the default VAT settlement method.
Changes in transactions in Northern Ireland
As of 2021 the VAT settlement method for goods sold in Northern Ireland changed. Settling VAT is much less complicated than it was anticipated prior to the introduction of the simplified VAT OSS scheme for e-commerce for EU member countries. The changes also include a new invoicing procedure. Currently invoices for goods sold in or via Northern Ireland are indicated with the XI prefix, instead of the GB prefix, as previously. The GB prefix will however remain on the invoices for provided services. This modification aimed at a more efficient VAT declarations management of tax payers registered in Northern Ireland. What is crucial for the sellers, is to differentiate between import and export.
A VAT number for Northern Ireland generated in OSS should also be included in an invoice for control purposes (it’s important to remember that it is a different number than tax identification number). It is possible to use both numbers for verification purposes but it must be indicated on the invoice what type of goods are subject to OSS, and what type of goods are settled in a standard Irish VAT declaration.
Adding new “XI” country codes for particular tax payers is crucial in maintaining order in trade between EU member states and non-EU countries. It will also take the administrative workload off clerks and entrepreneurs, and shorten the entire procedure.
In case of any questions or doubts regarding current VAT settlement methods for companies operating in Northern Ireland, it is worth seeking support of a tax advisor who always remains up-to-date with changes in taxation in EU.