Brexit has started

What does hard Brexit mean for Czech companies

The only certainty is that this major change is very likely going to happen and its consequences will be significant on our lives and businesses. Get ready now!

 

The hard Brexit might mean

  • The UK does not establish any new trade agreements with the EU
  • Only WTO terms are still applied – UK goods and services would be treated in the same way as American ones in the EU
Disruption towards economy High
Access to UK market Low
Additionals tariff sand duties Yes
New regulations Yes
Application of EU regulations in UK  Technically no, but limited discretion in reality if third country equivalence isrequired 
UK independent immigration policy  Yes
Independent trade policy  Yes – UK may negotiate free trade agreements with other countries especially expected in the financial sector 

 

Tax

  • Brexit will undoubtedly affect how businesses are taxed. Different exit scenarios will affect the extent of free movement of goods, services and people.
  • Many of the rules established by EU, implemented into the domestic laws of Member States for application across the EU, will no longer have effect. E.g., the zero rate of dividend withholding tax will not apply and UK parent companies will need to fall back on treaty rates of withholding.
  • UK companies operating in the EU and vice versa will need to review their VAT compliance, distribution models and operations.
  • Trade between the UK and the EU countries will be recognized as imports and exports. Customs duties could add costs through the entire supply chain. We can help you identify the potential increase in customs duty for different exit scenarios based on your current volumes of transactions from or to the UK

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Treasury

Our treasury experts can help you on all the below areas:

Foreign exchange and hedging

  • The recent unprecedented FX volatility is likely to stay or potentially increase. We advice to review your hedging programmes and / or introduce new ones.

Cash management

  • New regulations are likely to mean that the current cash management solutions working across the whole EU will stop working for the UK. We advice to assess what changes would be needed in such case.

Funding and performance of UK operations

  • It’s expected hard Brexit will trigger a period of recession in the UK. This would have impact on the performance and funding needs of UK related businesses and the cost of GBP debt. We advice to review business forecasts of your UK business and / or projected export to the UK and decide on next steps.

 

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Law and legal

  • Majority of EU law has already been implemented in the UK law in forms of directives and would not be affected by Brexit. EU regulations and similar forms are part of UK law as long as the UK is a member of the EU. However, once UK leaves EU, it can be expected that while some laws may not change, others will be replaced or changed to suit UK interests. PwC is closely monitoring the changes and likely impact on the business.
  • The UK supports the General Data Protection Regulation (GDPR) and it is already giving effect to many of the GDPR’s requirements. A departure by the UK from its progression would appear very unlikely.
  • The UK would not be part of the new European unitary patent system and separate patents will continue to be required for UK and rest of Europe. In addition, EU trade marks will no longer have effect in the UK.
  • UK’s financial crime regime is likely to be unaffected by Brexit. Changes to the enforceability of UK judgments in EU Member States and greater complexity and uncertainty surrounding insolvency proceedings can be expected.
  • Existing group structures may require review as may no longer continue to have the desired effect following Brexit

 

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Mobility

Social Security

  • Social security position of employees coming from other EU countries to work in the UK and vice versa will be substantially changed. Costs may increase due to necessity to provide more comprehensive private medical insurance to employees, dual liabilities may arise, pension rights may be fragmented and employee benefits may suffer a negative impact.

Mobility

  • Current freedom of movement rules will continue to apply until the date of a formal exit.              
  • Exit from the EU could mean the end of the Freedom of Movement principles. This would impact EU nationals seeking to exercise their rights to work, study, or simply move to the UK and also UK nationals wanting to move to or continue to live/work within the EU.           
  • Although it is widely expected that grandfathering will occur, whereby existing EU migrants would be able to continue to live and work in the UK, it is still unknown what transitional arrangements, if any, will be made.
  • Employers and employees need to be aware that following an exit, any immigration requirements for EU nationals in the UK will depend on the final agreements negotiated and may include burdensome visa and work permit procedures.

 

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Kontakty

Olga Cilečková
Treasury & Accounting Consultancy
Tel: +420 251 152 012
Email

Martin Diviš
Tax, Partner
Tel: +420 251 152 574
Email

Michael Mullen
Senior partner, PwC Legal
Tel: +420 251 152 700
Email

Tomáš Hunal
Mobility
Tel: +420 251 152 516
Email

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