Brexit – Solutions for cross-border investors in France
Brexit – Solutions for cross-border investors in France
Much is still unclear about the terms on which the UK will leave the EU, and therefore for many businesses across Europe the potential impacts are a major concern.
We understand that many of our British cross-border clients are worried about how their business activity in France might be affected by Brexit, particularly considering potential changes to VAT laws.
In light of this, we are adapting our services to support our clients through this uncertain time, to ensure, so far as possible, that it will be business as usual.
Where are we now?
Two weeks ago, Boris Johnson was elected Prime Minister of the United Kingdom. He has promised to take the UK out of the EU, with or without a deal, by the 31st October 2019.
Johnson claims that he will try to renegotiate the terms of Theresa May’s withdrawal agreement, notably to remove the Northern Ireland backstop put in place to avoid a hard border in Ireland. The EU has already stated on several occasions that negotiations on May’s deal will not be reopened. Johnson, however, claims that the EU will agree to an improved deal at the last minute to avoid a no-deal Brexit. It seems then, that if Johnson is unable to successfully renegotiate a deal with Brussels that all parties can agree upon, he will have to go through with his promise of leading the UK out of the EU without a deal. The UK Parliament may have the power to block this step being taken, so there could be uncertainty right up to the last minute on 31 October as to what will actually happen.
No deal Brexit:
If the UK is unable to agree on a deal approved by the EU before 31st October 2019, and if no further extension is granted, the country will leave without a deal.
In the event of a no-deal Brexit, Britain will be considered as a ‘third country’ and will be subject to World Trade Organisation regulations. This will notably affect the trading relationship between the EU and the UK.
The customs union which exists between EU member states means that all tariff barriers have been removed within the EU, which allows for free trade in goods and services. Giving up EU membership will result in inspections at borders and implementation of tariffs on trade. Trade between the EU and the UK will therefore become more expensive once the UK leaves the customs union.
Leaving with a deal:
Johnson will try to successfully renegotiate the terms of May’s deal with the EU which will need to be acceptable to the UK Parliament. Again, the EU has said on several occasions that it will not reopen negotiations on May’s deal.
In the case that a deal is negotiated, there will be an implementation period which will give businesses the opportunity to prepare for the new relationship between Britain and the EU. During this time, Britain will still be obliged to comply with all EU rules.
Many believe that as the general public was so poorly informed about the potential consequences of leaving the EU, and that so much has come to light since the referendum, it is only fair that a new vote is put to the people. Currently, this seems very unlikely.
Article 50 can be revoked at any point, so there is still a chance that Britain won’t leave at all. This seems unlikely without a general election and a new UK government, but cannot be ruled out given the impasse in Parliament.
If the UK is unable to agree on a deal approved by the EU before 31st October, and if no further extension is granted, the country will leave without a deal. This is currently considered the most likely outcome and the British government has increased preparations for a no deal Brexit.
In the event of a no-deal Brexit, Britain will be considered as a ‘third country’ and will be subject to World Trade Organisation regulations. This will fundamentally affect the trade relationship between the EU and the UK as tariffs will be applied to all goods and services. For the possibility of no-deal Brexit, businesses will need to be as prepared as possible before 31st October 2019, particularly factoring in additional WTO tariffs and other expenses.
For UK cross border investors to remain connected to France and to avoid any potential disruption in the event of a no deal Brexit, we recommend appointing a tax representative in France.
The customs union which exists between EU member states means that all tariff barriers have been removed within the EU, which allows for free trade in goods and services. Giving up EU membership will result in inspections at borders and implementation of tariffs on trade. Trade between the EU and the UK will therefore become more expensive.
For individuals and businesses outside of the EU exporting goods in France, as will be the case for British people dealing in France in the event of a no deal Brexit, certain transactions will be subject to VAT in France, for instance the buying and selling of goods. It will be necessary to appoint a tax representative that will undertake any accounting obligations and cross-border declarations, pay customs duties and carry out VAT formalities.
We appreciate how worrying Brexit is and understand how complicated and frustrating the French administration can be. Our tax and accounting experts are at hand to advise and support you throughout the twists and turns of Brexit, keeping you connected in France.
If you have any questions regarding withholding taxes, do not hesitate to contact us via telephone +33 (0) 1 53 93 94 20 or [email protected]. Our team of experts will happily assist you with any queries you might have.