The UK will leave the European Union at 11pm (GMT) on 29 March 2019. This will be without any agreement on its exit terms or future trading relations (‘no-deal Brexit’) with the remaining EU members (‘EU27’) or rest of the world.
In these circumstances UK businesses must evaluate their options and ensure that their business will not be disrupted.
Businesses dealing in e-commerce
After Brexit, an estimated 27,000 UK online sellers of goods to EU27 consumers will no longer be able to declare and pay the VAT via their UK VAT return in countries where they are below the annual distance selling threshold. This threshold is €35,000 per annum per country for the EU27, except for the Netherlands and Germany where it is €100,000.
After a no-deal Brexit, these sellers will have to either register in each country and pay VAT, or block EU resident customers. To avoid this loss of registrations simplification, sellers could move and hold stock to one state in the EU27.
They would be required to VAT register in this country, but would then be re-entitled to the distance selling threshold for sales to other EU27 countries if the stock is supplied from this new location. In this way, a no-deal Brexit would only require one new VAT registration.
Businesses providing B2C digital services
Since 2015, providers of digital services have been able to report sales to consumers across the EU via a special, single filing known as the Mini One-Stop-Shop (MOSS) return. This is completed on HMRC’s online platform, and then the funds are redistributed by HMRC to the appropriate EU27 government.
EU MOSS will end in the UK following a no-deal Brexit. Instead, UK providers will have to complete a single MOSS registration in any EU27 country, and then report in this way. Malta is an ideal jurisdiction for various reasons outlined underneath, one of the major ones being that the populations speaks English.
Businesses benefiting from EU funding
With Brexit companies risk losing out financial benefits of being inside the EU. To avoid this a company can re-domiciie its Head Quarters to another EU state. The operations can either be shifted to that other EU state or remain in the UK just like Steris the UK Company involved in medical supplies and microbiology testing firm did.
Businesses offering legal services
At present, as the UK is a member of the European Union, UK lawyers enjoy rights of audience across EU courts, and legal professional privilege apply to their legal advice in European Commission investigations and at the level of the Court of Justice of European Union (CJEU). Following Brexit, these rights of audience and legal professional privilege may go.
With the exception of EU/EEA lawyers, there is no precedent where a third country has been granted rights of audience in EU courts. Consequently UK lawyers would need to instruct EU lawyers to conduct advocacy in EU courts, and clients may therefore bypass their UK law firm and instruct firms which do have rights of audience at EU courts. Losing legal professional privilege at the CJEU would also be a material competitive disadvantage.
The effect of losing rights of audience would be felt across the legal services sector. The Chartered Institute of Trade Mark Attorneys (CITMA) highlighted in their written evidence the concerns of lawyers practicing in intellectual property law and trade marks. Without a suitable framework in place, UK chartered trade mark attorneys would lose the right to carry out EU trade marks and registered community designs work before the European Union Intellectual Property Office, including for UK clients
Businesses that need the best talent within the EU
Restricted access to talent and the mobility of people could result in a lack of employees. Malta is the right solution for this: Malta enjoys superbly sunny weather, attractive beaches, a thriving nightlife and 7,000 years of intriguing history, there is a great deal to see and do. In fact InterNations – Expat insider’s report for 2018 ranks Malta as one of the best qualities of life. Furthermore English is spoken by all the population.
Companies taking advantage of the Royalties & Interest Directive
Currently, any royalty payment made by business partners in the EU for music rights licenced in the UK is exempt from withholding taxes under the Royalties & Interest Directive. However this might change after a hard Brexit. Consequently companies holding rights in the UK might be better off in shifting their rights to another EU country just like Bertelsmann the giant German Media Owner said it is considering doing.
Companies that gain advantage from using the Parent-Subsidiary Directive
Without the Parent – Subsidiary Directive, the bilateral agreements between the UK and the other Member States will serve as the binding law, however, this could lead to certain distributions being subject to withholding taxes.
Furthermore, certain Double Taxation agreements may not provide for the relief of underlying tax at the level of the parent company.
The Double Taxation agreement between the UK and Malta outlines that:
- Dividends paid by a company which is a resident of Malta to a resident of the UK may be taxed in the UK. Such dividends may also be taxed in Malta and according to the laws of Malta, however, if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed that chargeable on the profits out of which the dividends are paid.
Distributions by Maltese resident companies to UK persons shall not trigger any withholding taxes. Furthermore, Malta also provides relief for underlying tax, being the tax paid at source to a resident person receiving a dividend from the UK, hence by re-domiciling your holding company to Malta double taxation would be completely eliminated.
Access to the European Court of Justice
The European Court of Justice (ECJ) ensures that the fundamental freedoms of the European Union are safeguarded. The decisions taken by the ECJ are binding to all countries. Despite there being no harmonisation in the area of direct taxation, the ECJ case laws serve as harmonisation policies.
By leaving the EU, the UK is no longer bound by the decisions taken by the ECJ.
High Net Worth Individuals
While the world’s super-rich will continue to invest in global property hotspots such as London, in HNWI will need a VISA from an EU member state. Malta has its own golden Visa program in addition to a citizenship-by-investment programme. Through these programme, Malta acts as a gateway to Europe, providing visa-free access to the European Schengen Area for those third-country nationals taking up residence on the island.
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