From 2016–2025, German exports to the United Kingdom (UK) fell by around 7%. Exports to the rest of the EU increased by 41% during the same period. This trend highlights the changes to the economic environment brought on by Brexit. However, many German businesses still maintain business relationships with the UK. This means they have to observe new regulations regarding taxes and customs.

In this article, we explain how Brexit has changed business between Germany and the UK and how it has impacted invoicing. We explain applicable regulations regarding value-added tax (VAT), customs, and imports. We also outline how businesses can bill customers in pound sterling (GBP) and how to enhance business processes for international payments.

Key takeaways

• Brexit has changed the way EU countries do business with the United Kingdom (UK), as supplies of goods and services are now treated in accordance with the regulations for third countries.
  
• Whether or not German value-added tax (VAT) is applicable to these supplies depends on the type of customer and the type and place of supply.
  
• Supplies of goods to the UK are generally treated as exports and require appropriate customs and export documentation.
  
• For services, VAT is determined by the status of the customer, place of supply, and any special regulations that might apply.
  
• Businesses in Germany need to adapt their invoicing, customs, and bookkeeping processes to reflect these new requirements.
  

How has Brexit changed business between Germany and the UK?

The UK's withdrawal from the EU fundamentally altered how goods and services move between the UK and Germany. As of 1 January 2021, the UK is considered a third country with respect to VAT. This means that many of the regulations on intracommunity commerce are no longer applicable.

Changes to VAT law

Brexit ended the UK's participation in the EU's VAT Directive. The UK government is now entitled to establish its own VAT system. This includes setting its own tax rates and tax exemptions and defining individual rules on taxation.

For German businesses, this means supplies of goods and services to the UK are no longer subject to the regulations on intracommunity commerce. Instead, they fall under the rules for business with third countries. This creates additional customs and tax formalities and higher administrative workloads.

Special case: Northern Ireland

After Brexit, special VAT rules apply to Northern Ireland. Shipments of goods between Northern Ireland and the EU are still subject to EU rules on VAT, particularly the rules on intracommunity supplies and purchases of goods. However, these rules do not apply to services.

Northern Ireland's special status also has an impact on VAT identification numbers (VAT IDs). Businesses in Great Britain use VAT IDs with a "GB" prefix. On the other hand, businesses in Northern Ireland use the prefix "XI" when goods are shipped between Northern Ireland and the EU and meet corresponding eligibility criteria.

After Brexit, British VAT IDs cannot be validated using the EU's VAT ID validation service or the German Federal Central Tax Office (BZSt) portal. Instead, businesses must use the "Check a UK VAT number" service provided by His Majesty's Revenue and Customs (HMRC), the UK tax authority. On the other hand, VAT IDs with an "XI" prefix can still be validated using the EU service.

Can German businesses continue issuing invoices to UK customers?

German businesses can continue issuing invoices to customers in the UK for sales of goods and services after Brexit. However, these invoices are now subject to the VAT rules on business with third countries, not the regulations on intracommunity commerce. The information required on an invoice and whether or not German VAT is due depends on the type and place of supply.

How do German businesses invoice the UK after Brexit?

The formal requirements for invoices issued to UK businesses haven't changed substantially after Brexit. Invoices are still required to contain the general mandatory invoice details stipulated by Section 14, Paragraph 4 of the German VAT Act (UStG).

What has changed is how VAT is applied to supplies of goods and services. Whether or not VAT is applied to a UK invoice depends primarily on whether the customer is a business or a private individual and whether the invoice is for a supply of goods or services.

Invoicing businesses

After Brexit, supplies of goods to the UK are generally not treated as intracommunity supplies of goods (ICS). Instead, they are considered exports, pursuant to Section 4, No. 1a of the UStG and Section 6 of the UStG. Exemption from VAT requires that the statutory documentation requirements are fulfilled.

Supplies of goods with a total value of no more than £135 are subject to special UK rules on VAT. In general, when sending goods with a total value less than £135 to VAT-registered businesses in the UK, overseas sellers are not required to charge UK VAT, provided the business customer provides a valid UK VAT ID. The business customer remits VAT according to the applicable UK regulations. This is known as the reverse charge procedure.

Deliveries with a value of more than £135 are generally imported via UK customs procedures and can be subject to import duties and other customs fees.

Reporting obligations for German businesses have also changed. Supplies of goods to the UK no longer have to be reported on the recapitulative statement under Section 18a of the UStG. These supplies are also no longer subject to Intrastat reporting obligations.

For supplies of services to UK businesses, the place of supply is typically the headquarters of the recipient. Therefore, in many cases, German VAT is not charged on services performed for businesses in the UK. Instead, the reverse charge procedure can be applied. This means that the UK customer declares VAT according to local rules.

Invoicing private individuals

After Brexit, supplies of goods to private individuals in the UK are also generally treated as exports. The old EU regulations on mail-order business – and the associated duty-free thresholds – no longer apply to supplies of goods to the UK.

Import VAT is not charged on goods with a total value of up to £135 that ship to private individuals in England, Scotland, and Wales. Instead, these supplies are treated as domestic supplies within the UK. Therefore, the German supplier must charge UK VAT and register for UK VAT where applicable.

VAT on services for private individuals in the UK is charged according to the type of service. While certain services are still liable for German VAT, others fall under special local rules. Therefore, it is important for German businesses to check what rules apply to them prior to invoicing.

What customs and import regulations apply to supplies of goods to the UK?

Following Brexit, goods that are shipped to and from the UK are subject to customs regulations for third countries. Therefore, businesses must submit customs declarations and observe import and export regulations. The legal basis for this is the Union Customs Code established in Regulation (EU) No. 952/2013. Goods must clear customs whether or not an invoice to the UK is issued with or without VAT.

Export declaration and documentation requirements

Supplies of goods to the UK are treated as exports for VAT purposes. These exports must be properly documented to be eligible for tax exemption.

An entry certificate – used for intra-EU business – no longer constitutes sufficient evidence. Instead, customs documents provide proof of export. In the case of electronic export documentation, the most important document is the export declaration issued by the Automated Tariff and Local Customs Clearance System (ATLAS) export procedure. The requirements that the export documentation must fulfil are stipulated in Section 9, Section 10, and Section 11 of the German VAT Implementation Ordinance (UStDV). If any of the necessary evidence is missing, the export can be refused tax-exempt status.

Imports to the UK

Imports of goods to the UK can incur taxes, such as customs fees and UK import duties. The applicability of these taxes and their rates depend on the value of the goods, commodity codes, origin of the goods, etc. The EU-UK Trade and Cooperation Agreement provides for tax-free imports of many goods, provided the respective rules of origin are fulfilled and documented. Failure to observe these rules can result in customs fees.

Therefore, businesses in Germany need to check what formalities apply and what documents are required for export before dispatching goods. Mistakes around customs clearance or export documentation can cause delays and additional taxes.

Can invoices to the UK be issued in pound sterling (GBP)?

German businesses are permitted to issue invoices in foreign currencies. This includes issuing invoices to UK business partners in GBP. German VAT law does not stipulate a specific invoice currency.

If German VAT is indicated on an invoice, then the tax amount in euros applies for tax purposes. If an invoice is denominated in GBP, then the corresponding amounts must be converted into euros to calculate tax, according to Section 16, Paragraph 6 of the UStG.

Practical tips for German businesses

Businesses in Germany can continue doing business with the UK after Brexit. However, they need to adjust their internal processes to reflect changes in VAT and customs regulations. This includes adapting enterprise resource planning (ERP) and bookkeeping systems for conducting business with a third country.

Before issuing invoices, businesses need to verify whether customers are businesses or private individuals and whether invoices are for supplies of goods or services. This information determines whether an invoice to the UK needs to be issued with or without VAT, for example.

It is also important to document transactions carefully. Businesses must ensure that all necessary customs documentation, export certificates, and VAT documents are complete. Mistakes with customs clearance can cause shipping delays and additional taxes.

German businesses also need to regularly review their master data and processes. Examples of this include checking UK business partners' VAT IDs and recording places of supply correctly. Since UK and EU rules on VAT and customs might continue to change, businesses need to monitor changes to the law and adjust their processes as necessary.

How Stripe Invoicing can help with international invoicing

Automated processes can help businesses avoid errors and reduce administrative workloads, especially when handling international customers. Stripe Invoicing helps businesses create, manage, and process invoices for UK customers.

Invoicing can create, personalise, and send digital invoices for one-time or recurring payments. Stripe supports more than 135 currencies, 100 payment methods, and over 25 languages. Businesses can also track the status of their payments anytime and send automatic payment reminders as necessary, enabling them to maintain a better overview of their open invoices and manage their cash flows more efficiently. Invoicing also supports integrations with existing accounting and ERP systems.

FAQs about invoicing the UK from Germany