Are you ‘established’ in the EU or the UK?

A person or business needs to be established in the UK or EU to meet several customs rules. In the EU, for example, a company must be established in the EU to act as a customs importer or exporter of goods. In some special regimes, like temporary admission, a person can only be authorised for duty and VAT exemption if they are not established in the territory. So, in both the EU and the UK, what it means to be ‘established’ or ‘resident’ can be critical for customs purposes.

An individual is established when they have a residence or are habitually resident in a customs territory. Living in the country for at least 185 days a year is widely used as a measure in Europe. For a company, established is about being incorporated or registered in the country or, if not, having a permanent place in the country from where business activities are carried out. This norm dates back from a 1983 European Community Directive which set rules for determining residence when contemplating tax exemptions for certain means of transport temporarily imported into one Member State from another.

Since then, establishment in customs and VAT terms has proven to be a more far-reaching concept. Having a UK or EU VAT or Economic Operator Registration and Identification (EORI) number does not necessarily mean that you are established.

Most HNWI have multiple residences in different countries. Some hold residence permits, and many use companies to hold their yachts and aircraft. They may even be liable for other taxes on their earnings, wealth, corporation, and gains in countries where they have their properties and companies. But that does not necessarily mean that they are established for customs purposes. Customs would always look to their usual residence in one place.

For the application of the customs and VAT rules the place where a natural person ‘usually resides’ can be analysed further to a painstaking degree using ‘tie-break’ rules. These consider where the person usually lives because of personal and occupational ties. Where the occupational ties are in a country different from that of the personal ties, or where no occupational ties exist, the place of usual residence is determined by personal ties which show close links between the person and a place where they’re living.

There is such a wide range of customs authorisations and simplifications that persons can access by being established in the UK or EU that the odds are often for a person to provide evidence of their establishment than of their non-establishment in the country.

So, when a HNWI person claims to be established or not in a customs territory for the purposes of accessing certain customs benefits or simplifications, it is worth taking a closer look to determine what they really mean.

Information in our blogs is very general in nature and should not be acted upon without first consulting with a tax advisor. Please feel free to contact Y & A Group, LP to schedule a complimentary consultation.