With a hard Brexit becoming an ever more serious option, a number of companies are moving staff to the continent. Others are taking less drastic action by reassessing their administrative systems in anticipation of the altered import/export situation. Our customers (mainly E-Business Suite users) have been preparing for Brexit as well and we would like to share some of their experiences.
Geographic indicators and EBTax
(for non-users: EBTax is Oracle’s VAT engine)
Until Brexit comes into effect, transactions will be regarded as intra-community provided the UK client has a valid VAT identification number with the British Tax Authorities. Once Brexit is implemented, transactions will be fiscally regarded as import or export.
The vast majority of EBS users also use Oracle’s tax engine EBTax. The extent to which Brexit will affect the organisation within EBTax depends on how EBTax is exactly configured as well as on who you have been doing business with previously.
Common customer considerations when preparing for Brexit
- In case you have never done business outside the EU before, completely new VAT codes need to be issued for import/export purposes. If a simple configuration is in place that generates VAT codes based on default settings of client/supplier/client address/supplier address, the existence of the right VAT code is sufficient.
- However, when the correct VAT code is automatically derived from geographic indicators such as Ship to Location and Ship From Location, among others, while applying the EU as a geographical zone, actions to be taken depend on the specific Oracle version that is in place:
R12 and earlier: the UK must be either removed from the EU zone or given an expiry date the moment Brexit comes into effect
Oracle Cloud: the geographical EU zone has been predefined. Oracle needs to release a patch that removes the UK from the EU zone.
Triangulation transactions
We have seen non-UK based companies thoroughly analyse their trade scenarios with the UK. In case very specific rules for governing transactions with the UK were implemented in the past, these may no longer be valid. One example:
After Brexit, a so-called triangulation (e.g. drop shipments), which means supplying goods within the EU while invoicing takes place via the UK, will have to be invoiced using a valid VAT number in the recipient country to allow for shipments at the 0% intra-community tariff. (Caution: exceptions do exist; in some cases triangulation could be considered as for example out of scope sales).
In the absence of a valid VAT number the VAT must be declared at VAT rates of the supplier country. Shipments from Ireland that are invoiced from the UK will have to take place outside the UK to prevent double export and import. Applying for a T1/T2 Customs Transit would be recommendable in such cases.
One more example: Offering electronic services in the UK from the EU is no longer covered by the VAT MOSS regulation. In this case your own VAT registration in the UK is required and has to be implemented first.
Master data
Although intra-community shipments will no longer apply to UK clients and this information may be removed from the master data accordingly (i.e.: the registration status ‘Registered’ in the client’s tax profile), we advise companies that use tax rules based on geographic indicators not to do so. Please also note that within companies using EBTax based on default settings of client/supplier/client address/supplier address, VAT codes for all business relations in the UK need to be adjusted at all entities involved.
It is a lot of preparing for Brexit everybody is going through. In case you want to share your own experience or if you have any questions for that matter, please contact Henk Tiesma at h.tiesma@4apps.com.
All information included in this Blog is provided in good faith, however, we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability or completeness of any information included this Blog.
