22 July 2021

Fiscal Representation and Article 23 license in light of Brexit

Fiscal Representation and Article 23 license in light of Brexit

It has been half a year since the end of the transition period of Brexit. Since then, many companies have continued to relocate from the United Kingdom to the Netherlands to establish or expand their business in Europe. Not only geographical location, but also financial incentives have motivated national and international companies based in the UK to develop in the Netherlands.

When importing goods into the EU, import VAT is charged as a percentage of the value of the goods. Usually, import VAT is paid at the time of import which can heavily impact the cash flow. However, the Netherlands developed an attractive and beneficial solution that limits the cash-flow burden on the importing company, an Article 23 license (VAT deferment scheme). According to the Article 23 license, the company responsible for clearing the goods through customs can defer the import VAT payment until the first regular VAT declaration. By then, the company can fully offset the import VAT which makes the import VAT just a reporting issue rather than harm on a company’s cash flow.

The Article 23 license became a beneficial solution to a lot of national and international companies based in the UK who wanted to establish in the EU. The Netherlands is one of a few countries in the EU that implemented the VAT deferment scheme. To operate within the VAT deferment scheme, non-EU-based companies have to acquire a fiscal representative. The fiscal representative will apply for the Article 23 license on the behalf of the importing company and defer the VAT payment. A fiscal representative is a local company, like Briddge Legal & Finance, responsible for the tax liabilities of a non-EU company. When the non-EU company is registered with Dutch tax authorities and receives its own VAT number, it can already register the imported goods in its name and freely circulate them within the EU.

Please, contact us for further information or if you are considering expanding in the EU. We will be more than happy to support you!