Many things changed when the UK’s withdrawal from the EU entered into force on 1 January 2021. The changes brought on by Brexit will have an impact on Finnish people and companies operating in Finland. The relationship between the EU and the UK will be significantly more distant than before.
On Christmas Eve, 24 December 2020, the EU and the UK concluded their negotiations on the Trade and Cooperation Agreement (TCA) and the complementary agreements on security of classified information and nuclear cooperation.
Businesses: From 1 January 2021, goods imported or exported between Finland and the UK must be declared to Customs. Businesses will then be required to observe the same rules, restrictions and customs formalities in their trade with the UK as with other countries outside the EU, that is, so-called third countries.
Individuals: When you order goods from the UK, all consignments delivered to you from the UK that are worth over 22 euros must be declared from 1 January 2021 and value added tax (VAT) must be paid. The rate is usually 24 per cent. Furthermore, you may have to pay customs duty for your consignment.
Businesses: The United Kingdom's withdrawal from the EU will affect value added taxation, excise duties and income taxation among other things.
Individuals: Brexit has no direct impact on individual taxpayers’ income taxes. A tax convention continues to be in effect on income taxation between Finland and the United Kingdom. The fact that the UK leaves the EU has no impact on how the tax authorities apply the agreed provisions and clauses.
The EU-UK Trade and Cooperation Agreement covers financial services in the same way as they are generally covered in the EU's free trade agreements with non-EU countries. The Trade and Cooperation Agreement commits both parties to keep their markets open for operators from the other party seeking to supply services by establishment. The parties also commit to ensuring that internationally agreed standards are complied with in the financial services sector.
Both parties preserve their right to adopt or maintain measures for preserving financial stability and the integrity of financial markets. The parties also aim to agree by March 2021 a Memorandum of Understanding establishing a framework for regulatory cooperation on financial services. The Trade and Cooperation Agreement contains no provisions on equivalence frameworks, as these are unilateral decisions for each party.
The Memorandum of Understanding and future equivalence decisions will significantly affect the nature of the EU-UK relationship in the financial services sector. The European Commission is currently assessing 28 equivalence decisions. The UK, for its part, has announced a number of equivalence decisions, adopted in the UK’s interest. In September 2020 the European Commission approved a time-limited (18-month) fixed-term equivalence decision concerning central counterparties (CCPs), which is of key importance to derivatives clearing. With this decision, the Commission aims to secure financial stability and provide financial market participants in the EU sufficient time to reduce their exposure to UK central counterparties.
Martti Salmi, Senior Ministerial Adviser, tel. +358 400 510 304, martti.salmi(at)vm.fi