Brexit’s Impact on International Investments
From 1 January 2021, the EU Trade Agreements that provide favourable terms for trading with other countries around the world will no longer be effective for UK companies. Businesses should assess their reliance on these agreements, and compare them with the agreements that have been negotiated by the UK to replace them (if they exist), to assess the likely impact of trading with these other countries in the future.
It is important to keep abreast of who the UK are negotiating trade deals with and how advanced these discussions are. Currently, post-Brexit we only have trade agreements with Japan, with a further 20 countries expected to take effect when existing EU trade agreements no longer apply to the UK, from 1 January 2021.
Upon leaving the EU, we will no longer be within the remit of the EU tax directives and this could result in local dividend withholding tax which will reduce the value of funds received by a parent company in the UK. In addition, the cessation of the EU Interest and Royalties Directive will impact cross-border interest and royalties paid to or from a UK company.
ACTIONS
- Consider whether dividends and other cross-border payments should be made by 31 December 2020
- Review Royalty and loan agreements and ensure exposure to withholding tax is understood and factored into cashflow modelling and pricing structures
- Gain an understanding as to what level and when tax will be withheld through dividend payments
- Keep abreast of negotiations on the EU Trade Agreements and understand possibilities for maintaining equivalent market access
- Keep abreast of Trade Agreements between the UK and other non-EU countries and identify opportunities
- Review existing EU business and consider the benefits of setting up a local presence to protect it
- Assess the opportunity in target territories by:
- Weighing up the costs and risks linked to these markets
- Considering admin, expertise and resourcing costs
- Seek support, guidance and advice from those who have made the move overseas
- Seek overseas support and guidance from the local members of the HLB international network
- Evaluate the end-to-end supply chain and assess the benefit of alternative models on service, cost and operational capabilities.