So, it has happened. As of 01.02.2020, Britain is no longer part of the EU. After much back and forth, the Brexit is over. At least for now. But what does this mean for e-commerce and online selling in Europe?
Maximilian GamplLast Updated on
What are immediate consequences for online sellers?
Amazon.co.uk is one of the most popular Amazon marketplaces in Europe – both for buyers and sellers. Especially companies from overseas tend to start selling in the EU from or in the UK.
That’s why many online sellers might worry a little bit now how the Brexit will impact their sales.
But good news first: for the moment, there won’t change anything. With 1 February 2020, the transition period has started. Everything will stay like it is until the end of 2020.
The UK will still be part of the European single market and customs union until the end of the year. That means all regulations will stay the same and no customs control or customs duties are to be expected. At least for now.
Brexit transition period: Duration & Regulations
The transition period will end on 31.12.2020. Until then, the EU and the United Kingdom can focus on new laws, rules and regulations that will determine Britain’s economic relationship with the European Union after this period ends.
Duration of the transition period:
As just mentioned, the transition period will last until 31 December 2020. If no agreement can be found, this could be extended for 1 or 2 years. This is only possible if both the EU and the UK agree on that before 01 July 2020.
Regulations during this time frame:
As long as we are in this transitional period, all laws regulations will stay active as they have been before the Brexit. That also includes EU law and therefore VAT and customs regulations as well.
If no agreement can be reached within this time frame, this would most likely lead to a hard Brexit. In this scenario, EU law will no longer apply for the UK and all current trading, customs, and other European regulations, like intra-community supplies, are no longer existent. More about that later.
How the Brexit affects Amazon FBA sellers
Amazon clarified on their website that for now, the no-deal Brexit has been avoided and during the transition period, all Amazon sellers can continue with doing their business just like before.
Pan-European FBA will still proactively transfer inventory across Europe, and the European Fulfillment Network (EFN) will continue to fulfil cross-border orders.Amazon
It was also stated that FBA sellers do not need to send their inventory to both sides near the border to prepare for a potential disruption. There could be some irregularities towards the end of the year, but Amazon does not know how the Brexit will develop and rash skip actions have never been worthwhile.
How will the Brexit continue in 2021?
To answer these questions, we thought about creating a list with possible scenarios but at the moment, we cannot predict what it well be like by the end of this year as there are so many variables. The question rather is if the EU and the UK can agree on the withdrawal agreement. This will decide whether there will be a deal or a no-deal scenario for the future.
The goal in this transition period is to find a proper withdrawal agreement for both sides. If that fails, there will be a hard Brexit and this would change the trade between the EU and the United Kingdom completely.
No-Deal Brexit: VAT, customs & other changes
Nevertheless, we will take a closer look on the no-deal scenario. If, unfortunately and unexpectedly, no agreement can be reached, then the hard Brexit is inevitable.
And this would mean that EU law is no longer applicable in the UK and that the United Kingdom is no longer part of the European internal market and of the customs union. And that in turn would mean:
- the end of intra-community supplies and deliveries
- the end of no custom duties for shipping within the EU
- UK is treated like an EU third country for VAT purposes
- issues with cross border shipping to the UK when no-deal Brexit starts
- Import VAT if not storing locally
The British government advices to prepare for a range of potential outcomes. In the no-deal scenario, trade between the EU and the UK could be as follows.
Selling from the EU to the UK
In the case of a hard Brexit, for deliveries that you send from an EU member state to the UK, the invoice will include no VAT. No VAT, it is still necessary to include your VAT though.
The place of taxation regarding VAT will be in the third country. It is possible that your goods may have to be taxed in the UK – that’s when normal custom duties arise.
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Please keep in mind that this is all hypothetical at the moment. It is naturally possible that there will be an agreement and if not, that there will be specific trade rules for the UK and the EU, like it is for Switzerland for example.
Note: Deliveries within the UK are taxed in the UK, reports have to be filed accordingly.
Selling from the UK to an EU third country
Goods that are delivered from the UK to an EU member state have to be taxed in the country of arrival.
Regarding the invoice, the regulations are the same as for deliveries from the EU to the UK. In both cases, no VAT will be charged but the VAT ID of the sender has to be mentioned on the invoice. This is mandatory!
Get ready for Brexit: Official Brexit Guide
The UK government has developed a Brexit Guide to help you prepare for changes on the UK-EU border if there will be no deal. But still, don’t drive yourself crazy now. This year everything will remain the same and so far, it is assumed that an agreement can be reached, and the hard Brexit can be avoided. We shall see.
In the end, it is still too early to make any accurate predictions about the outcome of the Brexit.
This uncertainty, of course, understandably increases the nervousness of many merchants. For this year there is no need to worry yet. How things will continue then, we will have to wait and see.
The question is whether there will be a hard Brexit or not – and that depends entirely on whether or not a withdrawal agreement can be drafted in the foreseen time.
In the case of no-deal Brexit, EU legislation will no longer apply for the UK and topics like trade, taxation, customs clearance and much more between these two parties will change entirely.
We will explain what is best to do when a no-deal scenario is foreseeable. In the meantime, we recommend keeping calm and hoping for the best!