U.S. Business, Brexit and the British Financial Market

By: Alan Sasserath and George Batas

Brexit has officially happened: as of January 31, 2020, the U.K. is no longer a member of the European Union (EU). To many Americans, Brexit may seem like a distant event “across the pond” of no significance to their world, but there are several important ramifications and opportunities for U.S. businesses.

What is Brexit? Brexit is the abbreviation for a British exit from the EU. The EU is an economic and political set of treaties existing between 28 European countries allowing, among other things, free trade and free movement of people between member countries. In June 2016, after a public referendum in the U.K. during which 17.4 million people (or 52% of the population) voted to leave, the process for exiting the EU, or Brexit, began. For many British nationals, the decision to leave came from the belief that the freedom to negotiate their own trade deals with countries would eventually allow access to more wealth and opportunities for British citizens and businesses.

From January 31 through December 31, 2020, the U.K. will be in a transition period, during which they will negotiate a new trade agreement with the EU, as well as with other countries around the world who have no existing EU deals. One of those countries is expected to be the U.S., with both sides stating such a trade deal could be negotiated simultaneously with the deal being discussed between the U.K. and the EU.

For U.S. businesses, this means that during the transition period, the U.K. must obey EU rules and trade regulations; however, they are now allowed to hold formal trade negotiations with countries such as the U.S. and Australia for both goods and services. Any new trade agreements would start at the end of the 2020 transition period, and although the U.K. seeks to remain aligned with EU regulations in such areas as the motor vehicle and chemical industries, their government states that they are open to modification if it is in the best economic interests of the country to do so – for instance, to reach a new trade deal with the U.S.

Many U.S. economic experts believe that Britain’s departure from the EU creates a host of opportunities for U.S. businesses, as well as a chance to deepen historically important economic ties between the U.S. and U.K. Although the two English-speaking countries already have one of the strongest economic partnerships in the world – exceeding a total annual trade revenue of $260 billion in 2019 – heavy EU regulations over the past few decades greatly inhibited the flow of trade in financial services, the telecommunications sector, the motor vehicles industry and in professional services. Furthermore, under EU regulations the U.S. faced a steep 11% tariff for agricultural exports. The U.S. is the world’s largest food exporter and the most efficient producer of food in the world. The U.K.’s exit from the EU presents a great opportunity for American businesses in the food export industry. As two of the most technologically and medically innovative countries in the world, huge opportunities are expected to open up for U.S. and U.K. businesses in these industries as well.

Other U.S. experts believe that Brexit heralds the end of multilateral economic growth, with many countries coming together to chart a common economic course, and that nationalism and bilateral trade agreements will become more common. For U.S. business owners interested in expanding overseas, this will mean carefully weighing the pros and cons of where to set up bases of operation in order to best take advantage of specific markets.

For U.S. businesses post-Brexit, a powerful U.S.–U.K. pact which eliminates or greatly reduces most tariffs, expands market access and writes new rules for digital trade could decrease costs and compliance burdens for businesses in almost every industry while also leading to billions in investment on both sides of the Atlantic. For American businesses already operating in the U.K. and concerned about less access to EU markets, such benefits are expected to help offset any potential economic consequences. An alternate suggestion would be to maintain operations in the U.K. while also expanding to another country within the E.U.

Please see our ongoing series of articles discussing the merits of various countries as a base of operations overseas, the first of which, Ireland, can be found here: http://bit.ly/2v46VC1.

Rarely does the U.S. have the chance to create a trade deal with a country so deeply alike to our own. As the world’s fifth-largest economy, the U.K.’s exit from the EU presents both opportunities and challenges for U.S. business owners.

If you are interested in additional information regarding Brexit and international tax implications, or if you are a business owner operating in the U.K. or the EU, please contact our team to learn more.

 

Ireland as a Business Gateway for U.S. Companies Expanding Overseas

By: Alan Sasserath & Marie Bradley

If you’re a U.S. business owner interested in expanding overseas, your first question is likely: where do I start? At Sasserath & Zoraian, LLP, we maintain several longstanding relationships with overseas firms to assist our clients as they navigate the complex world of international tax and international business. As a result, we’ve noticed that many U.S. businesses interested in cross-border expansion are unsure which location would be best to lay a foundation for their multinational company. This article is the first in a series highlighting some of our top picks.

The Republic of Ireland is an excellent location for businesses from startups to more established multinational organizations. Many U.S. businesses find Ireland an attractive base of operations due to its geographic location as midway between the United States and Asia; its membership in the European Union (EU), which allows simple and quick access to the rest of Europe; and the fact that English is spoken there, thus allowing an ease in communication appreciated by many Americans heading overseas for the first time. In fact, Ireland is the only English-speaking member of the EU that is on the Euro standard of currency, enabling businesses to avoid any exchange rate issues when dealing with other EU member states.

Ireland attracts huge amounts of foreign direct investment (FDI), second only to Singapore, which is due in part to government tax incentives and other public assistance available for high-growth companies. In 2013, Forbes ranked Ireland as one of the best countries for growing multinational businesses. The World Bank has ranked Ireland as number 23 out of 190 measured economies for ease of doing business, with its pro-business policy framework promoting a competitive business environment. Ireland’s 12.5% corporate tax rate is one of the lowest in the world.  Attractive tax incentives are also available to intellectual property and research and development companies.  Ireland has signed comprehensive Double Taxation Agreements (DTAs) with 74 countries and 73 are in effect.

Ireland has successfully attracted foreign investment since the 1980s.  It has a well-educated, highly skilled workforce complemented by its ability to attract non-nationals to study and work. This talented workforce is one of the youngest in Europe and is experienced in assisting multinational companies. Significant government spending on education, Dublin’s reputation as a key destination for international students studying abroad, and Ireland’s growing reputation as Europe’s “Silicon Valley” indicate that talented individuals will continue to seek opportunities in Ireland.

Ireland has an impressive foreign direct investment track record and is home to some of the biggest names in the technology, financial services, and pharmaceutical industries. Fifty percent of the world’s top banks, the top five global software companies, 18 out of 25 top financial services companies, and 24 out of 25 of the top biotech and pharmaceutical companies are located in Ireland. One-third of multinational companies in Ireland have had operations in the country for over two decades, and recently many foreign social media and online gaming companies have also chosen Ireland as a base for foreign operations. Finally, Ireland has fast-growing indigenous businesses, including medical technology companies, a software sector that exports to both the U.K. and U.S., and a competitive food and drinks sector.

U.S. businesses typically establish operations in Ireland for the following reasons:

1) setting up an EMEA headquarter or an Irish holding company;

2) undertaking research and development activities and/or setting up shared services centers; or

3) using Ireland as a low-tax hub to expand internationally into Europe and Asia while also maximizing tax returns.

Contact our team with any questions you may have, as well as to get started expanding overseas to Ireland!

About the Authors

Alan Sasserath, CPA is a Partner and Co-Founder of S&Z. He has over 30 years of public accounting experience and a broad background in accounting, tax, audit and financial planning. A member of International Tax Practitioners, a global group of experienced CPAs, accountants and lawyers, he is one of S&Z’s go-to resources for international tax concerns.

Alan specializes in international tax planning and compliance, transfer pricing review, transactional advisory, expatriate tax services, international business advisory and international outsourcing. He works with businesses and high net worth individuals regarding matters of both domestic and international tax.

Alan can be reached at alan@sz-cpas.com or +1 631-368-3110

 

Marie Bradley is Managing Director of Bradley Tax Consulting. She has broad experience in advising personal and corporate clients having previously worked in the taxation departments of PricewaterhouseCoopers and KPMG advising Irish and foreign multinational companies.

Marie is a highly experienced tax professional having particular expertise in the areas of Irish and international corporate acquisitions, foreign direct investment into Ireland and cross border tax planning for Irish companies expanding abroad.  She is a Fellow and past president of the Irish Taxation Institute.

Marie can be reached at marie.bradley@bradleytaxconsulting.ieLearn more about Bradley Tax Consulting at www.bradleytaxconsulting.ie