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Life After Brexit - An EU & US Perspective?

High domestic corporation tax rates have plagued companies in the US but with the new administration in the White House this is set to change. Plans to reverse the migration of intellectual property (“IP”) and non-US profits to lower tax jurisdictions with a series of incentives and punitive measures resulting in a more attractive domestic US market. This may make US companies more reluctant to transfer IP and non-US profits to relatively small markets such as the Republic of Ireland, where corporate tax on trading income currently sits at 12.5%. Particularly when this is coupled with significant set up and ongoing costs. With this in mind, the UK could become a much more popular destination for international holding companies compared with Ireland, boasting a much larger domestic market and still low tax rates. The latter becoming more competitive as the current corporate tax rate is currently at 19% (as of April 2017 and the lowest in the G7) is set to lower further to 17% by 2020.

Increasing number of European companies are thinking about the possibility of a tariff-free trade agreement between the UK and US, which politicians across the Atlantic seem very willing to explore. The US and UK represent the largest and second largest export market respectively and thus logically combining the two and setting up the UK as the international focal point would be logical for not just German companies but European businesses as well.

A potential soft Brexit could therefore have negative implications if we end up giving too much away for easy access to UK markets. These concessions are likely to be taxation and immigration which have been a hot topic of debate in the European Union. As part of negotiations we may have to agree to curtail plans to decrease corporation tax any further. Although Ireland would still have a lower tax rate, the UK would still offer a much larger market and comparatively low tax rate to other EU and international countries – even if the indication that President Trump is seeking to lower the US corporate tax rate from 35% to 20% or even 15% are realistic.

Positions on immigration policy after Brexit is something that will impact negotiations but could also work in our favour. Having a skilled workforce if the UK decides to stop all immigration from the EU or imposes restrictive high standards are one of the main concerns of international companies that are seeking to do business with the UK. Any compromise given by the UK government on these requirements for skilled EU nationals would increase the attractiveness of the UK post Brexit.

What is clear is that we are in a period of great uncertainty. It is ever more important to seek detailed professional advice before making international expansion plans.