31 December 2020 will be the final day of the so-called transition period after which British companies will no longer be subject to EU regulations. Businesses in England, Wales and Scotland will be subsequently bound by new rules and in order to continue operating in the EU countries may be obliged to register the company in a member state.
The end of the transition period related to the UK’s leaving of the UE will become a fact on 31 December 2020. Along with it British companies will lose the so-called European passport and, consequently, the rules according to which they carry out their cross-border operations will be subject to change.
During the transition period transactions between companies from the EU and those from the UK were settled on the terms relevant for the intra-community supply and intra-community purchase of goods. Starting from 1 January 2021 the situation will change; for instance, customs declarations will have to be made in the case of export of goods from the UK to the EU.
31 December 2020 will mark the end of the transition period related to Brexit, namely the United Kingdom’s leaving of the European Union. Following that date the rules concerning cross-border trade will change. Businesses should already start preparing for the upcoming changes.
Loss of the European passport will affect mainly businesses from the United Kingdom which:
Such companies will no longer be able to apply the intra-community rules concerning movement of goods and, in consequence, will have to apply the rules relevant for settlement of export and import. This is because starting from 1 January 2021 companies from England, Scotland and Wales will be treated as entities from outside of the EU.
The end of the transition period means significant difficulties in export and import of goods for British companies, among others:
Only some of the changes will start to apply as of January, as the process of implementation of the new regulations will be carried out in stages, thus:
The problems will, therefore, be substantial (the government’s guide concerning the functioning of the border with the EU after the transition period has over 270 pages), and one has to bear in mind that there is very little time until the end of the transition period.
On 2 January 2021 no current EU legal regulations will apply in the UK-EU relations, unless an international agreement is adopted between the EU and UK, though even then the rules of trading and carrying out cross-border operations will change.
Thus, there is relatively little time to prepare for the changes, and the faster British companies prepare themselves from the new situation, the easier they will function in the new conditions after 1 January 2021.
If the so-called no deal Brexit will become a fact, British businesses will face a real challenge related to adjusting themselves to the new rules of trading with the EU, though even in the optimistic case of an agreement concluded between the United Kingdom and the Union changes are unavoidable.
Especially British businesses may face limitations in free operation within the EU.
The simplest solution in order to avoid such problems is registering the company in an EU member state. Registration of a company or a branch in Poland by a British entrepreneur before the transition period ends will make it possible to minimise the difficulties related to the restrictions applicable to entities from outside of the EU. This is because a British business running a branch or a company in Poland will continue to enjoy economic freedom of the European Union.
Learn more: Brexit: Moving business to Poland
The most convenient solution is, therefore, to create a branch, establish a new company, or buy shares in a “ready-made”, registered shelf company.
In other cases, when after 1 January 2021 the entrepreneur will still want to export/import goods from and to, for instance, Poland, but will not register the company or open a branch here, they will have to appoint a tax representative. Regardless of appointment of a representative, such entities should make sure that they can operate in Poland without establishing a branch or a daughter company.
The tax representative’s task will be, inter alia, to settle tax for the foreign entity and carry out other activities arising from legal regulations. A tax representative may be an entity which meets the specific conditions provided for in the regulations. Learn more.
To sum up, Brexit, and especially the end of the transition period, involves serious consequences for companies from England, Wales and Scotland which have to start acting, if they want to avoid problems in the nearest future.
The best solution is to register the company in one of the EU member states, namely have a company or a branch in Poland. Due to this a British entrepreneur will retain their European passport and will continue enjoying EU’s economic freedom.
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