Information Note on Brexit

On December 31, 2020, the transition period set in the agreement defining the United Kingdom’s withdrawal from the European Union (EU) will come to an end: the United Kingdom (UK), which has been outside the EU since January 31, 2020, will also leave the Single Market and the Customs Union.

To date, no agreement has been reached between the UK and the EU to govern the future relationship. Nevertheless, it is important to note that the vast majority of the conditions applicable from January 1, 2021 are already known: border controls and regulatory formalities will be restored for all EU member states, whether or not an agreement is concluded.

The information below therefore aims to enable your companies to anticipate this deadline by mobilizing all the resources made available by the public authorities. We also attach to this email a presentation of the Ministry of Economy that the Federation attended, which details the main issues and specifies the various aid mechanisms.

1. Main impacts of Brexit

a. New customs formalities for the transport of goods to the United Kingdom

• Regardless of the outcome of the negotiations, customs formalities will be reinstated as of January 1, 2021.
• A “smart border” system has been set up by the French authorities, allowing companies to carry out formalities in a dematerialized manner before crossing the border.
• Numerous resources can be mobilized to prepare for this new system:
  – The customs guide to prepare for Brexit
  – The website of the French customs
  – Contact brexit@douane.finances.gouv.fr for any question or difficulty
  – Contact the local Customs Economic Action Unit (Pôle Action Économique douanier de proximité) to benefit from free, personalized support
  – Participate in Brexit webinars organized by customs services in the regions in collaboration with international partners

b. Developments in tax matters

• The tax treaty to avoid double taxation with respect to income tax and capital gains tax will continue to apply, as will the bilateral tax treaty for the avoidance of double taxation with respect to inheritance tax.

• The main issues at stake are VAT and corporate income tax:
  – As far as VAT is concerned, transactions carried out between France and the UK will be considered as imports/exports from or to a third country;
  – With regard to corporate income tax, expenses subcontracted to a UK approved research organization will no longer be eligible for the research tax credit.
• You can contact brexit.impots@dgfip.finances.gouv.fr for any question.

c. New obligations and changes in regulatory and industrial matters

• As of January 1, 2021, the Union and the United Kingdom will be two separate regulatory and legal areas.

• New certification requirements will apply for certain UK products entering the European market: bodies in the UK that used to issue certifications will no longer be able to do so, only EU bodies will be allowed to do so.

• Intellectual property rights will change from January 1, 2021 :
  – Existing EU unitary rights continue to be protected under the withdrawal agreement (EU trademarks, Community designs, etc.) ;
  – New EU unitary rights will no longer have effect in the UK and vice versa.
• There will also be an impact in terms of GDPR: the transmission of personal data from the EU to the UK will be subject to the rules applicable to data transfers to third countries.

d. End of freedom to provide services and freedom of movement for workers

• The freedom to provide services between the EU and the United Kingdom stops at the end of the transition period :
  – The withdrawal agreement currently covers the acquired rights of professionals exercising a profession subject to conditions (regulated professions – e.g. lawyers, accountants …). Therefore, professionals holding a British degree recognized in France will be able to continue to practice after January 1, 2021.
  – However, the agreement does not cover all situations: this is notably the case for temporary services provided by professionals exercising a regulated profession. As a result, current contracts could end when the transition period ends because these professionals would no longer be authorized to practice in France.
• The end of the transition period will also mark the end of the freedom of movement of persons between the United Kingdom and the EU:
  – Border controls on persons will be re-established;
  – British workers in France will be subject to the same immigration rules as third country nationals working in France, and vice versa for French workers working in the UK.

2. Practical recommendations

In order to best adapt to the new framework applicable as of January 1, 2021, the resources below are useful to prepare your steps:

• Carry out a diagnosis of the situation, in particular using the Brexit self-diagnosis tool, and the various Q&A on the brexit.gouv.fr website;

• Use the checklists by field of activity on the European Commission website;

• Contact government services in the regions: “Direccte”, Chambers of Commerce and Industry, France Team Export… ;

• Mobilize the non-financial support offered by Team France Export: regulatory hotline, Brexit reference advisor by region, web conferences and workshops, etc.;

• Mobilize the financial support offered by “BPI Assurance Export” :
  – Internationalization assistance and foreign exchange risk insurance for French exporters (negotiation exchange insurance, contract exchange insurance);
  – Hedging of the exchange rate risk in pounds sterling for exporters offering a catalog offer (list of several goods with different prices);
  – Guarantees, insurance and financing for companies wishing to position themselves in new markets or diversify their customer base (prospecting insurance), and assistance dedicated to small businesses, such as very small business loans or freely available credit;
  – Subsidies and financial mechanisms of the export component of the France Relance plan that can be mobilized for companies affected by Brexit (export stimulus vouchers, VIE vouchers, etc.).