Relocation to other EU member states is a key Brexit question for companies and employees, particularly in the banking, financial and insurance sectors. In these and other highly regulated sectors, Brexit will end the automatic right of UK-based operators to distribute products and services freely across the EU.
Relocation is taking place both physically and legally. UK-based employees are in the process of transferring their residence to countries where they are entitled to operate, such as Germany, France, Luxembourg, Belgium or Ireland. At the same time, UK company branches established in European countries are being converted into branches of companies domiciled in EU member states other than the UK. This means employees located in these branches will move from one legal entity to another, while remaining resident of the same country.
These ongoing movements raise two types of tax issues.
1. How to qualify legally the transfer of employees from an entity to another. Should it be considered for tax purposes as the sale of the UK business, which would involve a price to be paid to the UK company?
2. Which is the right country to establish, from a tax standpoint?