In view of a potential Brexit from the European Union, what are the implications on both UK companies and international companies dealing with UK directly and/or indirectly?
It is safe to say that in the absence of a Withdrawal Agreement, which would put in place a transition period until the end of 2020, the UK will be treated as a non-EU country for customs purposes as of 30 March 2019.
It is now urgent that businesses in the EU start preparing for the UK’s withdrawal.
Brexit will affect your company if…
- … it sells goods or supplies services to the UK, or
- … it buys goods or receives services from the UK, or
- … it moves goods through the UK.
All businesses concerned have to prepare, make all necessary decisions, and complete all required administrative actions, before 30 March 2019 in order to avoid disruption.
The following topics need to be carefully examined in order to minimize your risks:
- Responsibilities in the supply chain
- Certificates, licenses and authorizations
- Customs, VAT & Excise
- Rules of Origin
- Prohibitions and restrictions for import/export of goods.
- Transfer of Personal Data
More opportunities in more vibrant markets. Some argue that Brexit would liberate the UK government to sign fresh trade deals with more dynamic markets outside the EU. UK would be able to sing new trade agreements with dynamic non-EU countries, such as India, China etc.
Deeper talent pool. A Brexit could also be beneficial in terms of accessing a wider staff pool. UK companies will have to opportunity to employ more talented people from non-EU member states.
Fewer onerous regulations. Feelings run high on the subject of EU regulations. It is well known that EU regulations are becoming more and more complex and complicated, increasing the internal costs of EU companies in order to adopt these regulations. UK companies will not apply for these regulations hence no extra costs apply.
Tax system flexibility. The UK Government will be even more flexible to either amend its existing tax law and/or introduce a new tax system in the favor of both the UK companies and individuals. If the UK Government will decide to act as a competitor against the other EU member states, then they might decide to use London as a ‘tax heaven’ jurisdiction. They may give incentives to companies (local and international ones) by decreasing the corporation tax rates, giving incentives to investors, having more straight forward tax system.
Cross-border administrative burden. EU counterpart would make cross-border commerce more difficult to some degree.
Cross-border costs. British businesses exporting to the EU could be subject to new tariffs.
Uncertainty. Uncertainty is anathema to business, especially for companies that have more than 50% of their trading activities with other EU member companies.
Relocation of seat. UK companies may decide to relocate their seats/offices outside of UK.
Loss of income. UK companies and international companies may decide to be restructuring. As all companies aiming to generate more income hence more profit, they may choose to set up a structure that will help them minimizing any uncertainties.
The role Cyprus can play
Cyprus can play the role of “Godfather”, as the current tax system can be used in favor of the UK companies. This can be utilized considering that the UK companies decide to relocate their seats to Cyprus and/or shifting their international activities to a Cyprus company.
A combination structure that can be adopted is a Cyprus company with a branch in UK. This will give them the flexibility and the green light to maintain their activities in UK while they continue having access to EU and minimizing their taxes.
In addition to the above, UK individuals may decide to continue having a European access via a European passport. Cyprus should be their number one jurisdiction for helping them out from this issue.
Everything depends on the UK Government. If companies want to continue being successful and profitable, every UK company should react proactively hence they should make their strategic decisions irrespective of the UK outcome.
For more advice about how Cyprus Taxation laws can help you during Brexit, Contact Us for a free consultation.
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