Brexit Quo Vadis? | Preparing for an uncertain outcome
25 September 2019
2Brexit Quo Vadis?© Deloitte Belgium
Deal or no deal?
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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
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• 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
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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
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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
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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
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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
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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
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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
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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’
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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
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“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
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“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 1 Invoice 2
GoodsFrench
Supplier
Belgian
Intermediary
UK
Customer
VAT registration impact
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Services
What changes – From a UK Perspective
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
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Goods - Services
What changes – From an EU Perspective
“Dispatches and acquisitions” vs. “exports and imports”
Northern Ireland “backstop”
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)
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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
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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
Cross border flow of goods
Other transactions with market cost impact• Transportation costs (use & enjoyment)• Etc.
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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
Cross border flow of goods
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
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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.
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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
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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
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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
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Agenda
Contractual
impact
2
Regulatory
impact
1
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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
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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
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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:
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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:
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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
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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?
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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
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Wrap-up
Licenses & formalities
Brexit
Formalities
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The time to act is NOW
What’s next?
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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
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• 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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