Moving towards Brexit | Latest developments and business implications - Richard Doherty, Raoul Ruparel, Daan De Vlieger, Natalie De Blende ...
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Moving towards Brexit | Latest developments and business implications Richard Doherty, Raoul Ruparel, Daan De Vlieger, Natalie De Blende, Hendrik Viaene, Erin Clor, Eric von Frenckell 2 July 2020
Introduction Richard Doherty | Deloitte July 2020 © 2020 Deloitte LLP. All rights reserved. Moving towards Brexit | Latest developments and business implications 2
Agenda
01 04
The UK view People issues
Raoul Ruparel | Deloitte UK Erin Clor | Deloitte |
Global Employer Services
02 05
Customs, Trade and VAT after the Direct Tax aspects
Transition Period Eric von Frenckell | Deloitte
Daan De Vlieger, Natalie De Legal | Global Business Tax
Blende | Deloitte | Indirect Tax
03 06
Legal & Regulatory challenges Wrap-up & Closing
Hendrik Viaene | Deloitte Legal | Richard Doherty
Competition & Regulation
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 3
Practicalities • This webinar is being recorded and will be made available afterwards on Deloitte's Brexit Readiness Centre • The slide deck can be downloaded in pdf format in the module "Resource list“ • During the webinar, do not hesitate to drop questions in the chat box (anonymously) • Your questions will be addressed at the end of the webinar or after the event by e-mail © 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 4
Brexit timeline
5 June 2020 July-August 2020 28 November 2020 2021
Fourth round of UK-EU Accelerated negotiations Deadline for the presentation of the technical
negotiations finished commence deal to the European Parliament implementation
period?
31 January 2020 15 June 2020 15-16 October 2020
European Council meeting 31 December 2020
UK left the EU High Level UK-EU Summit
scheduled (opportunity to End of the transition period
reviewed progress
approve an Agreement &
send it to European &
national parliaments)
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 5
The UK/EU negotiations: the sticking points – which could block a deal
on trade & business
Structure of the deal Level playing field Security cooperation Fisheries Northern Ireland
• UK wants suite of • EU seeks non- • UK seeks access to • EU seeks Protocol
arrangements regression on EU EU security status quo • UK seeking light
• EU wants a rules after schemes • UK seeks annual touch ‘risk-based’
single deal transition • But will not accept arrangements approach
• Overarching • UK seeks to European Court of • UK submitted draft • EU expecting
governance is align with the Justice oversight deal on fisheries stringent border
key difference precedent of • Arrangements may prior to latest talks controls between
other trade deals take a long time to GB and NI
fully conclude • Concessions
could lead to
leverage elsewhere
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 6
Agenda
01 04
The UK view People issues
Raoul Ruparel | Deloitte UK Erin Clor | Deloitte |
Global Employer Services
02 05
Customs, Trade and VAT after the Direct Tax aspects
Transition Period Eric von Frenckell | Deloitte
Daan De Vlieger, Natalie De Legal | Global Business Tax
Blende | Deloitte | Indirect Tax
03 06
Legal & Regulatory challenges Wrap-up & Closing
Hendrik Viaene | Deloitte Legal | Richard Doherty
Competition & Regulation
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 7
Polling question 1
Which of the following outcomes to the EU-UK negotiations
do you believe to be the most likely?
• A comprehensive Free Trade Agreement with a robust
future governance system and consensus around
implementing the Northern Ireland Protocol
• A narrow and shallow Agreement – which both sides seek
to build on over time
• No Agreement – leading to a No Deal Brexit and the
accompanying uncertainty for business
• Not sure/don’t know
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 8
Agenda
01 04
The UK view People issues
Raoul Ruparel | Deloitte UK Erin Clor | Deloitte |
Global Employer Services
02 05
Customs, Trade and VAT after the Direct Tax aspects
Transition Period Eric von Frenckell | Deloitte
Daan De Vlieger, Natalie De Legal | Global Business Tax
Blende | Deloitte | Indirect Tax
03 06
Legal & Regulatory challenges Wrap-up & Closing
Hendrik Viaene | Deloitte Legal | Richard Doherty
Competition & Regulation
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 9
The UK view Raoul Ruparel | Deloitte UK July 2020 © 2020 Deloitte LLP. All rights reserved. Moving towards Brexit | Latest developments and business implications 10
Economic impacts of Brexit Source: HM Government, Long term Economic Analysis, Nov 2018 © 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 11
Economic impacts of Brexit Source: HM Government, Long term Economic Analysis, Nov 2018 © 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 12
UK/Belgium trade UK trade in goods with Belgium (2018) Product Exports | in €bn Imports | in €bn Total all products 16.9 30.8 Primary commodities 4.7 6.7 Fuels 3.4 2.9 Manufactured goods 10.4 23.8 Chemical products 3.3 7.5 Machinery and transport equipment 4.8 10.5 © 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 13
Customs, Trade and VAT after the Transition Period Daan De Vlieger | Deloitte | Global Trade Advisory Natalie De Blende | Deloitte | VAT Consulting July 2020 © 2020 Deloitte LLP. All rights reserved. Moving towards Brexit | Latest developments and business implications 14
Possible outcomes
Will a trade deal be agreed and
ratified by 31 December 2020?
NO YES
- Customs solutions from Withdrawal - New economic relationship between
Agreement will enter into force, in UK and EU starts in principle on 1
principle starting 1 January 2021 January 2021
Post-transition fallback scenario Future deal scenario
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 15Status and UK versus EU position on customs & trade
Trade and Rules of origin negotiations
1
• Same view regarding zero tariffs
• Rules of origin: UK would prefer rules as in EU-Japan FTA. EU would prefer UK to join PEM
Convention UK asks for diagonal cumulation
• UK wants mutual recognition of conformity assessments, sanitary & phytosanitary
standards and AEO status. Currently rejected by EU who would prefer to embed this in a
comprehensive agreement and only where safety and security aspects can be assured.
New UK Tariff (UKGT) – MFN tariff regime
2
• Replacement of Common External Tariff (EU CET)
• Tariff on 2.000 products eliminated and 6.000 tariff lines simplified – designed to make
trade with UK more attractive
• EU tariffs are rounded down to the next even number UK will always have a lower or
similar import tariff as the EU
Northern Ireland Protocol
•
3
UK recognizes the need for additional checks and infrastructure on trade between Great
Britain and Northern Ireland, as expected by EU
• UK differs with EU approach on: no new customs infrastructure; checks “where necessary”
and potentially when goods are on the market (UK point of view) rather than at customs
checkpoints (EU point of view)
• UK has not yet answered the question on how goods at “substantial risk” of entering the
Republic of Ireland will be identified.
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 16Post-transition no trade deal scenario | Customs impact
• Trade between UK and EU will be subject to customs formalities and duties, with a special status for Northern Ireland
• UK and Northern Ireland form one single customs territory (outside the EU customs territory), with its own customs
rules, duty framework, foreign trade policy (incl. the possibility to establish free trade agreements with non-EU
countries, etc.)
Examples of customs formalities affecting
future EU-UK trade flows (both imports
and exports):
1. Registration with EU and/or UK
customs authorities
2. Entry Summary declaration (ENS) is
submitted to the port of entry
3. Goods are risk-assessed prior to entry
4. Temporary storage declaration
(+additional check if required)
5. Customs clearance
6. Goods presented to customs
authorities: checks (e.g. on rules of
origin) and additional declaration
if required
These additional customs formalities
imply additional costs as well
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 17Post-transition no trade deal scenario | VAT impact
• Supplies of goods between GB and EU will be treated as imports and exports
• Supplies of goods between Republic of Ireland and NI would remain dispatches and arrivals under the terms of the
Northern Ireland Protocol (even if no FTA is reached by the end of 2020).
VAT impact on future EU-GB trade flows of goods
(import and export):
1. Change in VAT reporting (e.g. use of different
boxes in VAT return, sales to GB no longer to
be included in EC Sales List)
2. Impact tax codes (possible new tax codes or
codes becoming redundant)
3. Possibly more VAT registrations (due to EU
VAT simplification rules no longer being
applicable, e.g. triangulation, distance selling,
MOSS)
4. Change in evidence procedure (import/export
documents need to be obtained as evidence
for reporting)
5. Cash impact (in case imports in countries
without import VAT deferral)
6. New VAT legislation? (will UK introduce a
regulatory framework different from the EU?
Will they still adhere to existing ECJ case law?)
7. Chain transactions (inside EU or UK VAT
scope? Quid application quick fixes?)
Cross border services between EU and GB,
NI to be treated as services with third countries
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 18Post-transition no trade deal scenario | Regulatory framework &
Ireland issues
UK Regulatory territory • UK to implement and enforce its own
regulatory framework (which may be
EU Regulatory territory different from that of the EU)
• But Northern Ireland will align to the
following rules of the EU Single Market:
− Legislation on goods
− Sanitary rules for veterinary controls
− Rules on agricultural production /
marketing
− VAT and excise in respect of goods
− State aid rules
• Specific customs rules and procedures
will apply to trade between the EU and
Northern Ireland
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 19Post-transition no trade deal scenario | UK Phased implementation
From January 2021 From April 2021 From July 2021
UK importers of standard goods have All products of animal origin and all Traders moving all goods will have to
up to 6 months to complete customs regulated plants and plant products make declarations at the point of
declarations and tariff payments can will also require pre-notification and importation and pay relevant tariffs.
be deferred until completion of these the relevant health documentation Full Safety and Security declarations
declarations (except for some specific will be required, while for Sanitary and
goods e.g. tobacco or toxic chemicals). Phytosanitary (SPS) commodities there
Physical checks at the point of will be an increase in physical checks
destination are planned for several live and the taking of samples
animal species (especially those
deemed high risk)
1 2 3
This approach does not apply to the flow of trade between Northern Ireland and Ireland, or between
Northern Ireland and GB.
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 20Legal & Regulatory challenges Hendrik Viaene | Deloitte Legal | Competition & Regulatory Law July 2020 © 2020 Deloitte LLP. All rights reserved. Moving towards Brexit | Latest developments and business implications 21
Consequences of No Deal – Regulatory divergence
4 important affected areas
• Stakeholder preparedness • “UK GDPR”
notices (2018 – 2019) • Role of UK’s Information
• Notices for readiness Commissioner’s Office
(2020 – 48 available) • Transfers of data between
• Duplication of regulatory approvals if – EU/UK will require EU adequacy
UK diverges from EU rules decision and
– UK equivalent behaviour
Sectoral or
Product
Data
Regulatory
divergences
Contract
M&A
Reliability
• Merger control • Perform a contract check
• Foreign Direct Investment control • Contract renegotiation and redrafting
• Foreign subsidies in the Single Market should be high on your priority list
• Force Majeure will not come to
the rescue
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 22GDPR – Data
• GDPR provisions (implemented in UK Data Protection Act 2018) continue to apply in UK after Brexit
• 2 areas of uncertainty remain
Data transfers from EEA to UK Consistency and cooperation
• “Adequacy” is needed – otherwise: data transfer solutions • 1 lead supervisory authority for cross-border cases
at organization level required
−Report breaches to lead supervisory authority and UK
• Political Declaration (November 2019) and Commission Information Commissioner’s Office
Communication (June 2020) −Separate enforcement actions may lead to duplicate fines
−Data protection is “basis for cooperation”
−Adequacy assessment under GDPR and Data Protection
Law Enforcement Directive ongoing
• Adequacy decision expected during 2020
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 23Contracts – 6 months left to get ready
• Covid-19 may have been a reason for not devoting sufficient resources to review contracts – but it
will not be an acceptable excuse if problems arise
• Best practice approach:
No Force Majeure
Step 1
Mapping of
the parties Step 2
Mapping of the
Step 3
contract structure
Screening of Step 4
the contract Actual renegotiation 31 December
2020
1 July 2020 1 August 2020 1 September 2020 1 October 2020
Contract impact Renegotiate existing contracts
Intellectual property Pricing | Fluctuations
Urgency: Method:
Data protection | GDPR Delivery
• Hard Brexit vs. Soft • Depending on time frame
Brexit (2020) • Single general addendum vs.
Applicable law | Impacted Standards | Norms Case-by-case renegotiation
Competent court clauses (e.g. CE-labels, packaging)
Territory Sectoral regulations Future contracts
EU funding Duration | Timings
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 24M&A – European Regulatory hurdles increasing Post Brexit Is my M&A deal a “concentration” that must be cleared by competition authorities? • Which competition authorities will be involved? UK CMA will be added to the list • Impact on timing of transactions? • What kinds of decisions will be made (conditional or unconditional clearance, or straight prohibition)? Can my M&A deal be reviewed under Foreign Direct Investment legislation? • European Commission Screening Guidelines 25 March 2020 • FDI legislation at Member State level – several Member States are tightening their rules based on COVID-19 experiences (e.g. Germany, Hungary, Poland) and UK also • Will UK investment soon be reviewed under EU and Member State FDI legislation? Commission White Paper on Foreign Subsidies in the Single Market • Includes foreign subsidies facilitating the acquisition of EU companies (Module 2): −Notification obligation with European Commission when certain thresholds met −Suspension obligation −Application of European Interest test • Consultation ongoing until 23 September 2020, adoption during 2021 © 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 25
People issues Erin Clor | Deloitte | Global Employer Services July 2020 © 2020 Deloitte LLP. All rights reserved. Moving towards Brexit | Latest developments and business implications 26
Brexit timeline: People Issues
1 January 2021
• New UK immigration system.
All EU nationals arriving for
31 December 2020 work purposes or stays of
• Deadline for EU nationals over 90 days will require
to enter/stay/work in the visas.
UK without restrictions • UK nationals subject to same
(and vice versa). immigration rules as non-EU
citizens in Europe
2021
2020 30 June 2021
• Deadline for
applications by EU
nationals to apply
for “Settled Status”
or “Pre Settled
Status” in UK
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 27Freedom of Movement Landscape
United Kingdom and EU 27
Work Residence Travel Personal Income Tax Recognition of Social Security
• Right to work • Rights of EU • Visa free travel up • Protection from Professional • Expected
protected for citizens residing in to 90 days per double taxation Qualifications continuation
those in UK/EU UK (and UK in EU) 180- day period will remain • Applies to of current
before January before January 1, for business or in place qualifications arrangements on
1, 2021 2021 are tourism purposes • Negotiations obtained after social security
• Arrival post protected. • New electronic ongoing - future January 1, 2021 coordination
January 1: subject • Deadlines for travel protections • Impact limited to • Negotiations
to work visa registration of authorisations (capital gains tax) specific regulated on extent of
• Processing times presence: (ETA for UK, ETIAS not guaranteed functions coverage ongoing
can be long June 30, 2021 for EU) needed • After January 1,
prior to travel professional
(similar to the qualifications
ESTA system for subject to
visitors to the US) new rules
Immigration - UK Points Based System and Reciprocity
UK Points Based system Immigrant workers in UK New applicants require a job EU/UK negotiations Variation across the EU will
applicable January 1, 2021 have more freedom in the offer from a Home Office regarding immigration add complexity and require
for new arrivals labour market as they are approved sponsor, & must ongoing. Expectation that increased planning -
less dependent on their meet required skill and immigration rules for third processing times will
employers and do not need language levels country nationals will apply increase
permission to change jobs to UK nationals in EU on
Jan 1, 2021
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 28Direct Tax aspects Eric von Frenckell| Deloitte Legal | Global Business Tax July 2020 © 2020 Deloitte LLP. All rights reserved. Moving towards Brexit | Latest developments and business implications 29
Corporate income tax
Introduction
Brexit consequences What is at stake?
During transition period Loss of access to EU law for UK-related situations
• EU law will continue to apply during this period to and in the • Primary EU law: fundamental freedoms, including case law and
UK as if it were a Member State and any changes in EU law its impact on national tax legislations
will automatically apply to and in the UK • Secondary EU law: tax directives (Parent/Subsidiary Directive,
Interest Royalty Directive, (Tax) Merger Directive, ATAD, …)
After transition period
Key points of attention
• The UK’s starting position is to adopt all existing EU law into
• Dividends/interest/royalties: application of the Tax Treaties
UK law. This will create stability until and if the UK decides to
between UK and individual EU Member States
change its tax laws in the future
• Domestic tax legislations dependent on EU/EEA
• The existing tax reliefs and exemptions applicable to
residency/nexus of the parent company (e.g. Belgian tax
transactions between UK and EU based entities as well as
consolidation regime)
access to specific tax regimes/benefits may be affected after
• Participation exemption availability
the transition period
(e.g. UK subsidiary subject to a specific low-taxation regime
and upstreaming dividends to a Belgian parent)
• Loss relief
• Restructuring (and loss of access to the EU (Tax)
Merger Directive)
• Transfer pricing and elimination of double taxation
• Other (UK) tax legislation derived from EU Directives
(ATAD, DAC6, …)
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 30Agenda
01 04
The UK view People issues
Raoul Ruparel | Deloitte UK Erin Clor | Deloitte |
Global Employer Services
02 05
Customs, Trade and VAT after the Direct Tax aspects
Transition Period Eric von Frenckell | Deloitte
Daan De Vlieger, Natalie De Legal | Global Business Tax
Blende | Deloitte | Indirect Tax
03 06
Legal & Regulatory challenges Wrap-up & Closing
Hendrik Viaene | Deloitte Legal | Richard Doherty
Competition & Regulation
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 35Deloitte Brexit impact assessment: drivers of change for business
5 key themes – what we know and what still remains to be agreed
Trade and
Supply chain People Legal and regulation Tax and finance
market access
Customs declarations UK’s EU settlement scheme Corporate structure e.g., Standard Rules of Origin Outside of EU VAT system
establishment and board (RoO) framework
Proof of origin EU member state composition rules of Withholding taxes (subject to
registration schemes member states Sanitary and Phyto-Sanitary double taxation treaties)
Northern Ireland in UK (SPS) measures –
Known knowns
customs territory, but UK move towards same rules Cross border mergers border checks Changes to tax registration
applying union customs code for EU and non-EU nationals and reporting requirements
under points-based system UK outside of EU Technical barriers to trade
Customs duties, subject to regulatory bodies Northern Ireland – subject to
FTA negotiations UK’s future More limited services EU VAT rules for goods
immigration system Northern Ireland – broad access/certain areas excluded
Customs easements, mutual alignment to EU rules from FTA, e.g., audio-visual Macroeconomic environment
recognition of Authorised Conditions related to travel for goods may be influenced by
Economic Operator (AEO) to perform services – limited End to mutual recognition of FTA negotiations
framework within FTA State aid regulations – separate
Safety and regulatory approvals for Tax incentives –
security agreement Mutual recognition of Labour and social protection UK and EU subject to level playing
professional qualifications field commitments
Details of the operation of Environment and climate Specific arrangements for
the Northern Ireland protocol Social security cooperation change provisions Northern Ireland Details of the operation of the
(the protocol) Northern Ireland Protocol
Potential changes to UK
Known unknowns
regulation over time Financial services
Personal data flows
Third country FTAs
Product standards and
conformity assessments
Details of the operation of the
Northern Ireland protocol
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 36Polling © 2020 Deloitte LLP. All rights reserved. Moving towards Brexit | Latest developments and business implications 37
Polling question 2
Which of the following business activities is of most concern
to you regarding Brexit?
• Market access: trade barriers, delays, new regulatory
challenges, VAT changes
• People issues: work visas, contracting and personal tax
• Data flows
• Cross-border Corporate Structure & Direct Tax: forced
changes to your group structure, management and
financing
• Other
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 38Questions & Answers © 2020 Deloitte LLP. All rights reserved. Moving towards Brexit | Latest developments and business implications 39
Polling question 3 To what extent do you think your business is prepared for the end of the transition period on 31 December 2020? • Completely prepared and have no concerns • Not prepared but confident we have enough time • I am concerned we do not have enough time • I am very concerned we do not have enough time • Not sure/don’t know © 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 40
Wrap-up Richard Doherty July 2020 © 2020 Deloitte LLP. All rights reserved. Moving towards Brexit | Latest developments and business implications 41
Wrap-up
The time to act is NOW
i
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 42Deloitte’s Brexit support
Brexit Help Centre Brexit Readiness Centre
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© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 43Thank you
for your attention
© 2020 Deloitte Belgium. All rights reserved. Moving towards Brexit | Latest developments and business implications 44About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about to learn more about our global network of member firms. © 2020 Deloitte BE. All rights reserved.
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