#StrongerTogether

A new partnership with the United Kingdom

Until the end of the year nothing will change. But starting in 2021, a new comprehensive partnership with the UK will begin – one which is fair for all member states and in the interest of all citizens.

It is up to us to ensure that the EU holds together.
Olaf Scholz, German Finance Minister

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Taxes
Taxes


Taxes are payments in money that a public body collects to raise revenue and that do not entitle taxpayers to the performance of a specific service or benefit. Revenue collected from taxes is used to finance government functions.

What are the tax implications of Brexit?

The UK’s departure from the European Union will mean that it is no longer part of the community and that it will have third-country status from a tax perspective. To prevent any detrimental consequences for taxpayers and companies, 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) will enter into force.

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.

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2021

An agreement on the new partnership with the UK must be concluded by 2021. Until then everything will stay the same.

13

Until now, the UK has covered 13 percent of the EU budget.

900

German customs has created 900 new jobs to ensure that it is prepared for every Brexit scenario.

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Customs
Customs

Customs duties are taxes that are levied on goods imported into the EU by third countries. The EU itself is a customs union, which means that no duties are charged on movements of goods between member states. The responsibility for administering and collecting customs duties lies with the member states themselves. However, the revenue from customs duties goes to the EU. Customs duties are a central instrument of the EU’s common commercial policy and serve to protect the European economy. Brexit makes it necessary to clarify how the movement of goods between EU member states and the UK will be handled in the future.

How will Brexit impact customs?

The customs administration is well prepared to carry out its tasks even in the case of a no-deal Brexit. Companies need to be prepared for changes, too.
 

German customs has significantly beefed up its staff numbers. Approximately 900 new positions have been approved. Most of these will be used to support the main customs offices in areas affected 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.

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Budget
Budget

A “public budget” encompasses a state’s total revenue and expenditure. The EU also has its own budget, which enables it to perform its functions. The EU budget derives its revenue mainly on the basis of contributions from the member states. The UK’s withdrawal from the EU means that the UK will no longer contribute to the EU budget.

How will Brexit impact the EU budget?

With the UK’s withdrawal from the European Union, the EU is losing one of its biggest contributors to the EU budget. While the UK will continue to be liable for its share of financial obligations undertaken while it was a member of the EU, the country’s withdrawal will nonetheless leave a dent in the EU budget. Consequently, the EU budget needs to be rethought and the remaining 27 member states will have to redistribute the contributions to the EU budget amongst themselves.

This will be done during the negotiations on the new Multiannual Financial Framework (MFF), which will take place during Germany’s EU Council Presidency. The MFF for 2021-2027 is particularly important not only because of Brexit, but also because of the coronavirus crisis. It will play a key role in the EU’s economic recovery and will enable sustainable investments in strategic goals. In light of this, Germany will work towards ensuring that the EU’s spending is focused more strongly on sustainable and future-oriented policy priorities. The MFF will be aligned to these tasks and the change in the number of member states.

As Europe’s largest economy, Germany is also the biggest contributor to the EU budget. Currently we contribute about 21 percent of the budget, and this is set to increase. At present, the EU’s annual budget is around €160 billion.

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Financial market
Financial market

“Financial market” is the umbrella term for all markets where capital is traded and financial services are performed. The EU internal market also includes the financial market. Within the EU, financial service providers can engage in cross-border business activity if they are established in an EU member state. Brexit will affect both the EU financial market as well as London’s position as a financial centre.

How will Brexit change the UK’s access to the EU financial market?

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.

Other topics

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Modern EU finances

For a sustainable economic recovery: the new MFF will play a key role in shaping Europe’s future.

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Customs union

Nothing to declare: The customs union facilitates trade in the EU, protects citizens and simplifies travel.