Following the United Kingdom’s withdrawal from the European Union on 1 February 2020, the agreed transition period is ending on 31 December 2020. This means that the UK will leave the single market and the customs union, and that EU rules will no longer apply to it. The German Finance Ministry is currently reviewing the new agreement and will be providing extensive details in the next few days.
It is up to us to ensure that the EU holds together.
Here you can find some initial information issued by the German government.
This means that, from 1 January 2021 onwards, the UK will no longer be part of the internal market and the customs union. Even if an agreement on future relations is concluded by the end of 2020, the EU’s relationship to the UK will change fundamentally and will substantially differ from when the UK was a member of the internal market. For example, different customs and tax formalities will be required. The countries, companies and citizens in Germany and the whole EU must prepare for the consequences of the end of the transition period. They must do so regardless of whether or not a deal is struck for a new agreement on the future relationship.
To help with this, the European Commission published a ‘Communication on readiness at the end of the transition period’ on 9 July 2020. The European Commission is currently reviewing the over 90 sector-specific stakeholder preparedness notices it published during the Article 50 negotiations with the UK and is updating these notices where necessary. The updated readiness notices on individual sectors (including customs, VAT, excise duty, banking and payment services) are designed to help administrations, businesses and EU citizens prepare for the changes that will inevitably set in once the transition period ends, regardless of the outcome of negotiations on future relations.
The EU strives to have a close partnership with the UK in the future, too. We firmly believe that a successful agreement on the basis of the Political Declaration is possible. However, it is important that we prepare for all possible outcomes of the negotiations. This includes preparing for a no-deal scenario. The European Commission has published a communication.
The UK’s departure from the European Union will mean that it will have third-country status from a tax perspective, too. To prevent any detrimental consequences for taxpayers and companies in matters that have already been largely completed, the Act on Tax-Related Provisions Concerning the Withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union (“Tax Act Relating to Brexit” for short) entered into force on 29 March 2019.
Because the terms of the UK’s departure are still unclear, the Tax Act Relating to Brexit is unique in that it covers every possible scenario. Various provisions of the Act concern business taxation, and among other things it also contains a grandfather clause for “Riester” incentives.
Regardless of the outcome, the double taxation agreement between Germany and the UK will continue to apply. This agreement ensures that income is not taxed twice. The two countries’ tax administrations can also continue to work together.
The UK is Germany’s seventh most important trading partner; Germany is the UK’s second most important trading partner. The UK is the EU’s third most important trading partner; the EU is the UK’s most important trading partner.
Until now, the UK has covered 13 percent of the EU budget.
German customs has created 900 new jobs to ensure that it is prepared for every Brexit scenario.
The customs administration is extremely well prepared in terms of continuing to carry out its tasks even in the case of a no-deal Brexit. Businesses must make preparations for changes as well.
German customs has significantly beefed up its staff numbers. Approximately 900 additional positions have been authorised. In particular, additional staff will be deployed in the areas that are affected especially strongly by Brexit.
German customs has also set up arrangements for the flexible deployment of staff, and is implementing IT-supported procedures to optimise clearance procedures. These additional measures will come into play especially if no agreement is reached on rules specifying future relations between the EU and the UK.
Besides the customs administration, German businesses also need to be prepared for Brexit. To raise awareness in the business community, informational events have taken place all over Germany. German customs communicates regularly with postal and express service providers in particular. In addition, comprehensive information has been made available online.
Businesses that trade with the UK should check whether their existing authorisations can be modified by a main customs office or if they need to apply for new ones. They should also check whether they have to register with the customs authorities and if they are set up for the electronic exchange of information with the customs authorities.
With the UK’s withdrawal from the European Union, the EU is losing one of its biggest contributors to the EU budget. The UK will continue to contribute its share in terms of the financial obligations it assumed during its time as a member of the EU. Nevertheless, Brexit means that the EU will lose valuable revenue and that the EU’s budget will, in essence, be financed by only 27 member states.
As Europe’s largest economy, Germany is also the biggest contributor to the EU budget. Currently we contribute about 21 per cent of the budget. From 2021 onwards, we will be contributing about 24 per cent of the budget, as the UK’s withdrawal from the EU will increase Germany’s relative economic size within the EU.
Companies within the EU that provide cross-border financial services requiring authorisation can use the EU passport. The passport enables companies that are established in a member state of the European Economic Area (EEA), and that have the necessary authorisations, to operate in all other EEA states. In accordance with the Withdrawal Agreement, the EU passport will no longer be available to UK firms after the transition period ends. Rather, they will then be subject to the rules that apply to non-EU member states (third countries).
The extent to which UK firms will still be able to provide cross-border financial services in the EU will depend on whether the EU grants them access to the EU financial market on the basis of sector-specific rules for third countries.
Therefore, all affected stakeholders – companies and customers alike – should prepare themselves for a situation where UK firms no longer have passporting rights to conduct business on the EU financial market after the transition period ends.
