Considerations on COM(2020)360 - Amendment of the VAT Directive as regards the identification of taxable persons in Northern Ireland

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dossier COM(2020)360 - Amendment of the VAT Directive as regards the identification of taxable persons in Northern Ireland.
document COM(2020)360 EN
date November 20, 2020
 
table>(1)The United Kingdom withdrew from the European Union on 31 January 2020 on the basis of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (‘the Withdrawal Agreement’). The Withdrawal Agreement provides for a transition period that is to end on 31 December 2020. Until that date, the provisions of Union law on value added tax (‘VAT’) are to be applicable to and in the United Kingdom. After that transition period, the provisions of Union law on VAT are to no longer apply to or in the United Kingdom.
(2)However, in accordance with Article 8 of the Protocol on Ireland/Northern Ireland (‘the Protocol’), which forms an integral part of the Withdrawal Agreement, provisions of Union law on VAT as listed in Annex 3 to the Protocol concerning goods are to continue to apply in Northern Ireland (3) after the transition period so as to avoid a hard border between Ireland and Northern Ireland.

(3)Therefore, taxable persons and certain non-taxable legal persons will be subject to provisions of Union law on VAT for transactions in goods in Northern Ireland, whereas they will be subject to the provisions of United Kingdom legislation on VAT for all other transactions in the United Kingdom, including in respect of Northern Ireland.

(4)For the proper functioning of the Union VAT system, it is essential that a distinct VAT identification number is granted to every taxable person who carries out supplies of goods in Northern Ireland and every taxable person, or non-taxable legal person, who makes intra-Community acquisitions of goods as listed in points (a), (b) and (c) of Article 214(1) of Council Directive 2006/112/EC (4), or to a taxable person in view of the use of the optional special schemes for taxable persons making distance sales of goods.

(5)Therefore, distinct VAT identification numbers with a specific prefix should be introduced in Northern Ireland to distinguish between taxable persons and non-taxable legal persons whose transactions in goods located in Northern Ireland are subject to provisions of Union law on VAT, on the one hand, and persons carrying out other transactions for which they are identified for VAT purposes in the United Kingdom.

(6)As a rule, prefixes of VAT identification numbers in the Union are based on ISO code 3166 – alpha 2 – by which the Member State of issue may be identified. Northern Ireland has no specific code under that system, but the ISO foresees the possibility to use X-codes for territories that do not have a specific code. Therefore, it is appropriate to propose the code ‘XI’ for Northern Ireland.

(7)Directive 2006/112/EC should therefore be amended accordingly,