Prepare for the worst-case scenario

Two years after the UK has decided to leave the European Union, there is however a growing concern that both parties will go their separate ways without a well-developed compromise. It is however absolutely vital that an agreement is reached before 19 March 2019. Without a compromise, there won’t be a transition period and the UK will leave the European Union immediately in that scenario. The European Commission has recently alerted private individuals, companies and governments to take into account the possibility of a hard-Brexit, with all its consequences. Secretary Kris Peeters has also announced that a website will be launched on which Belgian entrepreneurs can determine the impact of the Brexit on their company.

Impact of Brexit

Apart from how the eventual relationship between the United Kingdom and the European Union will look like, it is without a doubt that companies have to actually prepare themselves for this worst-case scenario.

The impact on your company

The field of indirect taxes (VAT, customs and excise duty) would be directly impacted by the worst case scenario Brexit. For example, the trade between the United Kingdom and Belgium would be directly subjected to customs duties and formalities. This would inevitably lead to an increase in price of Belgian goods sold on the UK market and vice versa. In terms of direct taxes (E.g. withholding tax, income tax) a worst-case scenario could mean that from that date on there can no longer be called upon the simplifying EU-legislation. In the absence of the Parent Subsidiary Directive, this could mean that a subsidiary would no longer be able to distribute dividends to its parent exempt from withholding taxes in an European – UK situation. For dividends between Belgian companies and companies located in the UK this would however not lead to an increase of the tax burden. This under condition that both parties continue to exempt dividends from withholding tax paid to enterprises located in a country with which a tax-treaty has been concluded. 

Another possible consequence of a worst case scenario is that in case of a merger, acquisition or reorganization, UK companies will no longer benefit from the beneficial tax regime under the EU Merger Directive. 

The impact on your personal life

On a personal level a worst case scenario Brexit would also have its consequences. After all, the possibility exists that Belgian nationals working in the UK will need to pay UK social security contributions. If this does happen those persons will have to pay social contributions in two countries, while current EU-legislation makes it possible under certain conditions to only pay social contributions in your country of residence.

Whether this scenario will actually take place, is to determine in the upcoming weeks. However, as a company it is absolutely necessary to anticipate the coming change. This is because Brexit will not just affect the export and import between both countries, but will ensure that a lot of companies will have to question their current business model. Therefore, if you have any questions in the meantime of the concrete impact of the Brexit on your company, do not hesitate to get in touch with one of our specialists via contact@vdl.be.