Tax Implications of Brexit
Leave or Remain? We will know the answer today! One can imagine that if UK leave the EU, the country is very likely to have their own tax and TP legislation. Facing the possible leave vote, MNCs may eager to determine the potential tax implications such as the absence of the EU Parent-Subsidiary Directive and the imposition of WHT on dividends.
There may be tax implications in the following four areas in the event of a leave vote:-
1. Transfer Pricing
TP rules are necessary to be enacted such that they apply to affiliates to both within borders and cross-borders within the EU. The jurisprudence of the Court of Justice of the EU would not bind the UK if it leaves the EU.
2. Country-by-country reporting
The UK may not require to be bound if it leaves the EU.
3. Custom duties
The UK government may need to immediately enter into trade negotiations between the UK and the EU and other WTO member states and those countries which have free trade areas with the EU. The imports from the UK into the EU may put UK corporations at disadvantage when compared with rivalries within the EU.
A harmonized VAT system is shared within the EU. The UK may change how VAT is levied, or just simply replace it with a new tax.
ABOUT THE AUTHOR: Catherine Le Bourgeois, Main Partner and Wilson Yeung, International Tax Director
Masson de Morfontaine is an international tax and business advisory firm based in Hong Kong and Shanghai. We are keen on providing our worldwide clients with practical tax solutions as well as implementation. Please feel free to contact us.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.