Since the UK left the European Union (EU), there have been a number of businesses establishing subsidiaries in EU member states.
These overseas bases of operation are often intended to smooth over some of the issues with trade experienced as a result of the Brexit deal, this includes, but isn’t limited to:
- New red tape – Although Brexit was meant to help businesses eliminate regulations, administration and red tape imposed by the EU, the reality is that exporters and importers now face new customs and border arrangements that can frustrate trade. To avoid these issues, some brands have set up on the continent.
- Challenges with goods, services, and data– With the flow of goods, services, and data between the EU and the UK complicated by the new trade rules, many UK firms have established companies in the EU to reduce the complexity of selling or servicing EU customers.
- Future thinking – The decision by some businesses to set up in the EU go beyond just the challenges of Brexit and consider the benefits of having overseas operations and the ability to break into new markets. Setting up a subsidiary can be a great springboard for growth.
What are the benefits of having an EU subsidiary?
There are a variety of advantages to having a base in the UK, including:
- Goods and services that are transferred or sold within the EU can move without restrictions or tariffs.
- Less administration is required due to the common bureaucracy and regulations between EU member states, which can prevent delays or costs in the sales process.
- Businesses can recruit EU workers with a better understanding of local consumers and markets, which could potentially give you a competitive advantage against other UK rivals.
- Establishing an EU subsidiary may not be as costly as many businesses may think, especially if you consider the additional costs of transporting and paying tariffs on UK goods entering the EU.
What are the disadvantages of having an EU subsidiary?
Although setting up an EU hub for your businesses can be advantageous, there are some things to consider:
- You may have to settle and pay multiple tax bills in the EU and UK.
- Your EU operations and profits from them could have an impact on your tax position in the UK and vice versa.
- If you continue to transfer goods or services between the EU and UK you could still face regulatory hurdles and new tariffs.
- You could overstretch your current finances in trying to establish yourself in new markets.
- You might experience new competition from overseas businesses for the first time.
Reanda UK is a subsidiary of leading independent accountancy firm Grunberg & Co Limited. Our aim is to help businesses and individuals to navigate the UK’s world-renowned business and tax infrastructure, and to support them with their international ambitions. To find out how we can help you, please contact us.