Brexit Quo Vadis? | Preparing for an uncertain outcome · 2020-05-14 · • Customs warehouse / VAT warehouse • Inward processing (actieve veredeling | perfectionnement actif)

Brexit Quo Vadis? | Preparing for an uncertain outcome

25 September 2019

2Brexit Quo Vadis?© Deloitte Belgium

Deal or no deal?

Brexit Quo Vadis?© Deloitte Belgium 3

Introduction

Current state of play and what to expectMr. Herman Van Rompuy | President Emeritus of the European Council

Global trade & Supply chain aspectsFernand Rutten | Global Trade Advisory

VAT aspectsNatalie De Blende | VAT

Mobility & Workforce aspectsFilip Van Overmeiren | Global Employer Services

Legal/contractual aspectsPhilippe Heeren | Laga

Other aspectsEric von Frenckell | Laga

Brexit as a business riskBenjamin Elen | Risk Advisory

Wrap-upFernand Rutten | Global Trade Advisory

Agenda

1

2

3

4

5

6

7

8

9


• Webinar is being recorded and will be available afterwards

on Deloitte's Brexit Readiness Centre

• Slide deck can be downloaded in pdf in the module

"Documentation & Links"

• Don’t hesitate to drop questions in the chatbox

(anonymously)

• Questions will be addressed at the end of the webinar or

after the event

Practicalities

Brexit Quo Vadis? | State of play and what to expectHerman Van Rompuy | President Emeritus of the European Council

September 2019


President Emeritus of the European Council

Herman Van Rompuy

Current

• Professor at the

universities of Leuven and

Louvain,

the College of Europe in

Brussels and Sciences Po

in Paris

• President of the European

Policy Centre.

EU functions

• First full-time President of

the European Council

(2009 – 2014).

Federal functions (Belgium)

• Prime Minister of Belgium

(2008 – 2009)

• Speaker of the Belgian House of

Representatives (2007-2008)

• Several government positions, including

Minister of State (2004), Vice-Prime

Minister and Minister of Budget (1993-

1999), and Secretary of State for

Finance and Small Businesses (1988).

Brexit Quo Vadis? | Global trade & Supply chain aspectsFernand Rutten | Deloitte | Global Trade AdvisorySeptember 2019


Principal implications of UK no longer being part of the EU Customs Union :

• No more free movement of goods between EU and UK – physical borders with customs inspections

• No more common foreign trade policy

• Different regulatory framework

Implications of leaving the EU Customs Union (‘no deal’ scenario)

Brexit Customs & Trade implications

EU Customs territory - current EU Customs territory – post Brexit


Ten specific examples of Customs impacts

Import / export formalities Customs value

Increased duty (and service) cost Systems & procedures

Customs responsibilities & liabilities between parties

Registrations & authorisations(e.g. EORI number)

Product classification Simplifications & special procedures

Preferential origin Regulatory requirements


What actions businesses could and should take

Make agreements on responsibility & liability

Reach out to suppliers / customers, anticipate by reviewing and modifying terms and conditions

Organise clearance process & support

Develop clearance procedures,secure broker support and agree on terms / communication process

Registration & license application

Prepare (and submit) registration and license applications where required / beneficial

Prepare systems & data

Consider implementation of customs & trade support systems, review and upgrade customs master data quality

Invest in dedicated talent, build knowledge and assign roles and responsibilities

Obtain insight

Look at potential Brexit exposure against a range of scenarios, including no-deal

Build customs & trade knowledge


Companies need to understand the resilience of their supply chains in the face of key Brexit challenges, and adapt where necessary

The impact of Brexit on Supply Chains

Organisational resilience and operations

Distribution, inventory planning and borders

Suppliers: visibility, mapping and assurance

• Increase visibility and awareness of critical suppliers

• Understand and assess supplier readiness

• Identify potential changes in supply base

• Understand potential to near shore suppliers

• Quantify increased costs due to customs duties, processing costs and regulatory divergence

• Understand where regulatory change may threaten supply

• Consider impact of border delays on inventory storage and distribution channels

• Establish approach to managing Brexit (e.g. centralised task-force)

• Identify potential risks to contractual obligations

• Understand potential for staff shortages in critical operational areas

• Factor lead times into decision timeframes


Only as strong as your weakest link, organisation focusing on uncovering hidden areas of risk in multi-tier supply chains

Visibility of critical suppliers

Brexit requiring companies to review their whole supply chains. Visibility down the tiers of the supply chain a real challenge

Engagement with critical suppliers to assess their Brexit readiness, identifying those suppliers posing the highest risk to operations

Potential that UK based suppliers have no customs experience/capability

Raises the need for full visibility of contract risk


Planning for immediate disruption as well as long-term variation to lead time

Distribution and inventory planning

Planning for significant impact at the Channel Ferry Ports and Tunnel – extra checks - reduced capacity

Sourcing alternative routes – using deep sea ports and air bridge capacity

Stock levels for ‘critical’ products - warehousing and distribution centre review – how long for and who holds the stock?

Need to consider Day 1 impact and then living with the ‘new norm’


Does supply chain optimisation post-Brexit mean a change to the supply chain strategy?

Organisational resilience and operations

• What are the long term strategic priorities?

• What immediate changes need to be made to manage short term disruption?

• Does Brexit present a case for change?

Strategic priorities

• What will the impact be on operational and financial performance?

• Is the operating model still fit for purpose?

• What additional lead times should be factored into decision timeframes?

Operating model

• How can supply chain resilience be enhanced?

• Who are the critical suppliers and do they have robust plans in place?

• What is the potential for staff shortages in critical operational areas?

Resilience

• Do supply chain capabilities maintain competitive advantage?

• Does current sourcing present an advantage?

• Do contracts need updating?

Competitive advantage

Brexit Quo Vadis? | VAT aspectsNatalie De Blende | Deloitte | VATSeptember 2019


“Dispatches and acquisitions” vs. “exports and imports”

Northern Ireland “backstop”

Compliance obligations such as Intrastat and EC sales lists, refund claims, MTD

“Postponed” accounting

Distance sales

Supply with installation

Simplification measures such as Triangulation, Call-off stock, etc.

Goods

What changes – From a UK Perspective

Invoice Goods

BELGIUM

UK

Potential VAT cash flow impact




Compliance obligations such as Intrastat and EC sales lists, refund claims, MTD

“Postponed” accounting

Distance sales

Supply with installation

Simplification measures such as Triangulation, Call-off stock, etc.

Goods


Invoice 1 Invoice 2

GoodsFrench

Supplier

Belgian

Intermediary

UK

Customer

VAT registration impact


Services


Financial services

• VAT treatment with non-UK counterparties

• VAT Consequences of Restructuring

Electronically supplied services

• The “Mini One Stop Shop”

Tour operators

The VAT portal


Goods - Services

What changes – From an EU Perspective



Compliance obligations such as Intrastat and EC sales lists, refund claims, etc.

“Direct VAT registration” vs. “Fiscal representation” and related impact on VAT treatment

Distance sales, Supply with installation, Simplification measures, etc.

MOSS, Financial services, Tour operators, etc.

Certified Taxpayer Status (CTP)


VAT impact

Cross border flow of goods

Intracommunity

deliveries /

acquisitions

imports / exports

Market cost

Compliance cost

Lead times

Operational cost

01

02

03

04Import declaration

Export declaration


Reduction

• Customs warehouse / VAT warehouse• Inward processing (actieve veredeling | perfectionnement actif)

Post Brexit impact

• Import duties payable in BE + DE• Prefinancing of import VAT in DE

Flow of goods

Goods are sent from the UK to BE and GermanyPart of goods are sent from BE to the US

Market cost


Other transactions with market cost impact• Transportation costs (use & enjoyment)• Etc.


Reduction

Building stock pre Brexit (subsequent sale in UK?)

Post Brexit

NO simplification!BE company has to apply for a UK VAT number

Pre Brexit

Goods are sent from BE to the UK customer (call- off stock regime) = simplification rule = no vat registration in UK

Compliance cost


Other transactions with compliance cost impact • Triangular / chain transactions • Tolling services • Delivery of goods with installation• Distance sales

VAT-ID

Brexit Quo Vadis? | Mobility & Workforce aspectsFilip Van Overmeiren | Deloitte | Global Employer Services

September 2019


No Deal Impact readiness

HR Brexit readiness

Social Security

Changes to social security legislation could have an impact on not only the cost of certain assignments, but also on the social security benefits to which the employees are entitled. Understanding these changes and their implications for your workforce and their families will be essential in order to communicate clearly and help them through the changes of Brexit.

Immigration

Changes to immigration policy may rapidly change the available talent pool, and could affect current staff. Understanding this legislation and its implications for your workforce will be key to effective workforce planning and to guarantee their right to reside and work. Workforce planning

With change in market conditions, the economy and talent pools, workforce planning strategies need to be in place, with an adapted reward plan.

Understanding the impacted workforce

It is important to be able to gather data, plan and assess the impact on your workforce.

Brexit HR action plan

Changes to immigration and social security legislation require the adaptation of mobility processes, but also clear communication and of individual employee guidance on actions to be taken regarding the right to reside and work and social security coverage.


HR Brexit readiness

Key considerations

Check whether travel insurance coverage is sufficient to cover both work and personal days within any trip or assignment to the UK

Travel insurance

No free movement of workers:

• Assess no-deal immigration legislation • Applying for (pre-)settled status for EU nationals in the UK• Registration for right to remain for UK nationals in the EU

Immigration

European driving license no longer valid for UK employees, so possibly need to request international/local license

Driving licenses

No EU social security coordination rules:

• Check application of (revived) bilateral treaties or national law per country• Assess validity of social security documents (A1)• Assess impact on social security benefits (medical care, family benefits, pension, …)• Cost modelling (e.g. double liability)

Social Security

Professional qualifications may no longer be recognised and local qualifications may be requiredProfessional qualifications

Ensure access to relevant emergency contacts for employees in the country in which they are traveling and provision of details of assistance/support lines by the employer

Accident/

Medical emergency


What actions should employers take?

HR Brexit readiness

2 Brexit communication

• Build & validate communication plan (goals, stakeholders, timing, format, channel)

• Build (paper/online/digital) communication materials (cf. team briefings, intranet webpage, video conference, digital communication)

1 HR Readiness assessment

• Multidisciplinary diagnostic overview of the impact of a ‘no deal’ Brexit

• Recommendations regarding workforce management, reward, mobility processes and cost modelling

• Brexit assessment menu:

• Easy-access Brexit workshop• Webinar• Conference call• Memorandum

12

3 3 Individual guidance

• First Aid Brexit FAQ: support employee self-assessment to answer basic Brexit HR questions

• “Brexit surgery”: deeper analysis of individual cases

• Assistance with immigrationapplications, social secuity formalitiesand coverage and driving licenses.

Brexit Quo Vadis? | Legal aspectsPhilippe Heeren | LagaSeptember 2019


Agenda

Contractual

impact

2

Regulatory

impact

1


Importance of thorough preparation

General legal considerations

Generally, agreements cannot be terminated by invoking ‘force majeure’ if the circumstances have changed since Brexit.

BUT:

• ‘force majeure’ could be applied in specific situations, if there is an impossibility to execute an agreement

• unforeseeable circumstances could lead to a disruption of the contractual relationship

• What legal framework will be applicable to agreements? Implications on choice of law / choice-of-court / recognition and execution of judgments

• UK: apply own rules England / Wales / Scotland / Northern-Ireland: different legal frameworks

contract scan (inbound | outbound) needed

• Implications for free movement? e.g. financial: import duties/customs? Or, e.g.: human resources: visa requirements?

• Territorial: scope of an agreement?

cover by contractual backbone

Brexit is not ‘force majeure’

Certain agreements are a potential source of conflict

Risks inherent to Brexit


Brexit specific clauses

Renegotiation clause Anticipate the uncertainty concerning contractual consequences of Brexit

Continuation clause Anticipate the continuation of the agreement after Brexit

Liability clauseClause to limit the liability of parties in the case they would not be able to meet (certain) contractual obligations after Brexit without being exposed to legal and/or contractual sanctions

Unforeseeable circumstances Anticipate the disruption of the contractual relationship due to Brexit

Exchange rate clause Anticipate currency changes by valuing currencies at a given date or moment, to limit / appoint the risk of change of value to a specific contracting party

Territorial scope Anticipate a dynamic interpretation of the term ‘EU’ by referring explicitly to the UK

Choice-of-law / Choice-of-court Anticipate post-Brexit discussions in case of conflicts on the competent court and applicable law

Arbitration clause Establish legal certainty on dispute settlement by referring the resolution of a possible dispute to an arbitrator

Case-by-case approach is needed

Brexit Quo Vadis? | Other aspectsEric von Frenckell | Laga | Global Business TaxSeptember 2019


Corporate tax & withholding tax aspects

Hard Brexit scenario Soft Brexit scenario

• The UK’s starting position is to integrate all existing EU law into UK law

• This will create stability until and if the UK decides to change its domestic tax laws

• Existing tax reliefs and exemptions currently applicable to transactions between the UK and Belgian entities (and entities from other EU Member States) might cease to apply if and when the UK decides to amend its legislation

• During transition period: EU law will continue to apply during this period to and in the UK as if it were a Member State and any changes in EU law will automatically apply to and in the UK

• After transition period: still unclear at this stage; will depend on the EU and UK’s agreement on the Future Relationship

In the long run, existing tax reliefs and exemptions applicable to transactions between

UK and EU based entities may be affected

No immediate impact unless UK amends domestic law: No immediate impact:


EU funding

Hard Brexit scenario Soft Brexit scenario

• UK beneficiaries in EU funding projects are no longer eligible for EU funding;

• EU funding projects involving at least 3 independent entities located in 3 different EU Member States of which one is the UK => whole project becomes ineligible for funding;

• EU funding project coordinated by a UK partner => a new, EU based coordinator needs to be appointed;

• EU funding projects in proposal phase and involving a UK entitywill need to take into account above points in order to be eligiblefor funding

• During transition period: UK will be considered as an ‘associated state’, in which case there is no immediate impact on EU funding projects involving UK entities

• After transition period: will need to be negotiated between theUK and the EU

If you are involved in a EU funding project involving UK beneficiaries, it is strongly recommended

to assess the Brexit risk and find out how to mitigate impact

Immediate impact: Impact is delayed:


Physical business location

What are the key Enterprise Location issues

arising from Brexit?How can organisations address these issues?

• The competitiveness of UK-based operations and assets of foreign and export-driven UK firms would be impacted by changes in key prices and currency volatility.

• The future EU market access and trade regime is uncertain. Impact from the outcomes of trade negotiations with the EU and the rest of the world could vary across sectors with the most exposed sectors being aerospace, automotive, financial services, life sciences.

• UK’s ability to attract and/or retain EU talent may be impacted by the outcome of the free movement of labour negotiations.

• Understand how various Brexit-related uncertainties could potentially impact the organisation’s strategic objectives and its location footprint in the UK and beyond.

• Define possible scenarios (e.g. FTA vs WTO) and run simulations on the organisation’s location footprint. Understand the trade-off between business fit and cost of alternative locations vs UK ones under different scenarios.

• Identify a number of viable back-up location options under different scenarios for future detailed investigation as and when a particular scenario materialises.

Considering the uncertainties and unclear timing of Brexit, businesses should assess their HQ,

logistics and manufacturing facilities footprint based on clearly defined scenarios.

Brexit as a business riskBenjamin Elen| Deloitte | Risk AdvisorySeptember 2019


Nine key questions

Assessing the Impact

Are (some

of) your

critical

suppliers

based in the

UK?

Does your

business rely

on EU Free

Trade

arrangements

for market

access to the

UK?

Are (some

of) your main

customers

based in the

UK?

What % of

your

employees

are UK

nationals?

In what

locations

does your

business

have

operations?

Can your

suppliers

provide assurance

regarding their

Brexit

readiness? Are

contracts Brexit-

proofed?

Do you tender

for EU public

contracts (or

seek EU

grants)

together with

UK-registered

parties?

Do you hold

data on the

UK in BE/EU

or BE/EU

data in the

UK?

How are the

goods or

services you

provide

regulated, and

by which

regulatory

bodies?


Assessing and managing Brexit related risk

• Despite ongoing uncertainty as to the end state for relations between the UK and the EU, it is possible and advisable for businesses to

consider what the impact of Brexit may be on their operations against different scenarios

• The scenario of most change (no deal, no transition) should be used as a planning base line and organisations should map impact across all

business functions

• Assess the level of risk and any potential opportunities through a Brexit Impact Assessment• For businesses potentially facing significant issues that may affect their ability to operate – a short term ‘crisis

management’ plan should be established given the limited time potentially remaining

• Identify Brexit issues, scenarios and business specific considerations

• Gather data and engage stakeholders from affected business units

• Analyse impact of most likely scenarios (including scenario of most change)

• Identify ‘red flags’ – issues that will have consequences for business continuity or key investment decisions

• Identify contingency requirements

• Detailed planning for organisational and operational changes – timing, resources and decision trigger points

• Implement operational and organisational changes

• Review forward business strategy to align to new trade and immigration conditions

Brexit Impact Assessment Readiness Planning and Actions

UnderstandEvaluate situation

AssessConduct analysis

Readiness planning and actions

Assessing the Impact

PlanFormulate strategy

ACTImplement

Wrap-upFernand Rutten | Deloitte | Global Trade AdvisorySeptember 2019


Wrap-up

Licenses & formalities

Brexit

Formalities


The time to act is NOW

What’s next?


Your gateway to latest developments, analysis and insights

Brexit Readiness Center

• Latest developments

• Upcoming webinars and seminars

• Brexit Readiness Updates

• Business impact

• Industry insights

• How Deloitte can help

Featuring


• Corporate & withholding tax

• Customs and trade

• Legal

• Location strategy

• People

• Public funding

• Risk management

• SMEs

• Supply chain

• Technology

• VAT

Brexit Task Force

Who to contact for help?

Brexit Help Center

Questions & answersAllSeptember 2019

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Documents

Brexit Quo Vadis? | Preparing for an uncertain outcome · 2020-05-14 · • Customs warehouse / VAT warehouse • Inward processing (actieve veredeling | perfectionnement actif)