The UK is due to leave the European Union on 29 March 2019 – in just six months time. And as anyone following the tortuous negotiations will know, there has been precious little progress towards reaching a formal agreement on the terms of the UK’s withdrawal or future trade relations with the 27 remaining EU Member States. In the absence of any clear lead from either Westminster or Brussels, businesses inside and outside the UK are now having to consider their options under both a ‘hard’ and a ‘soft’ Brexit scenario.
In practice Brexit will require negotiation of a wide range of new arrangements with the EU and other countries. This may result in the UK participating as a non-member in aspects of the EU on terms very similar to those currently in place, whilst other aspects are likely to be radically different. Similarly, negotiations with non-EU countries could play out in a number of different ways. Taken together, this amounts to a wide range of possible outcomes.
At Sovereign, we have been seeing an elevated level of enquires from both sides. UK-based firms keen to retain access to their coveted European markets are considering the establishment of subsidiaries or branches in one or more of the remaining EU27 states.
Malta, Cyprus, Portugal and Ireland seem to be the most favoured locations, but the specific circumstances of individual businesses will dictate where best to establish to secure rights of access to the bloc’s market after Brexit. Sovereign is located in several EU countries and has close associations in the remainder, so we can assist with setting up any new structure that is required.
Conversely, there are firms from all over the world that have existing EU operations that are based outside the UK. They too face the risk of losing access to the UK’s relatively affluent market of some 66 million people and we are seeing a greater demand for UK companies as a result.
An increasing number of such foreign firms are also considering setting up holding structures and Sovereign can advise on the various attractive and advantageous options available. Gibraltar companies are increasingly popular as part of a holding structure and with good reason. Like the UK, Gibraltar does not levy withholding taxes on dividends but, in addition, the corporation tax rate is only 10% and this is not charged on income that is derived or accrued from outside Gibraltar. And, of course, there is no VAT.
Given the impact of Brexit on freedom of movement within the EU and how it may affect the ability of businesses to attract and retain the best talent means that residency considerations for key executives, senior staff and their families have become a key issue. The UK offers ‘residency by investment’ programmes for both entrepreneurs and wealthy investors, while a number of EU member states also operate similar programmes.
Again the same four countries – Malta, Cyprus, Portugal and Ireland – are all firm favourites, but don’t overlook some of the newcomers such as Estonia and it’s e-residency scheme. These so-called ‘golden visa’ schemes seek to combine an investor friendly attitude with either a northern European or a Mediterranean lifestyle.
In the case of Ireland, particular advantages apply. There is no language issue and its laws and processes will be very familiar to people that are used to the UK. A key point that is often overlooked is the existence of the Common Travel Area (CTA), which was established in the 1920s to give British and Irish citizens the ability to travel freely between the two countries.
The CTA pre-dates the establishment of the EU and is a bilateral agreement that is separate from negotiations between the EU and UK on Brexit. The arrangement allows Irish citizens to move freely to live, work and study on the same basis as a UK citizen in Britain, and vice versa. It allows access to employment, healthcare, education and social benefits, as well as the right to vote in certain elections.
Every business is different and how you plan for Brexit will reflect this. Sovereign can help you establish or move forward your Brexit planning process, looking at the risks and the opportunities. We can help you navigate what, for many, will be a period of considerable uncertainty.