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Global Tax Planning Risk: Brexit Challenges

The outcome of the recent US Presidential election surprised many, and it is just one more in a string of recent drivers of global economic, legislative, and regulatory uncertainty. Brexit, EU State Aid investigations, and the OECD Base Erosion and Profit Shifting (BEPS) Actions figure most prominently among these disruptions; each will significantly influence foreign direct investment, trade, banking, corporate taxation, and the exchange of tax information between jurisdictions.

The combined impact of these major changes has altered the global tax landscape while elevating the importance of the tax planning conducted within the tax departments of multinational enterprises (MNEs).

A recent CEO Insight article examines how MNEs can weather this uncertainty, while managing tax liability and reputational risk, through careful navigation and the help of powerful tools. The article features insights from Vertex thought leaders on the ways Brexit, BEPS, and EU State Aid will challenge MNE tax departments – and the ways that technology can mitigate these challenges.

Concerning Brexit’s impacts, George Salis, Senior Tax Compliance Principal and Certified Business Economist (CBE) at Vertex, emphasizes, “The precise political, economic and supra-constitutional implications resulting from Brexit cannot be predicted until such time as the nature of the UK’s reformed relationship with the European Union (EU) becomes clear.”

What is apparent at this point, Salis notes, is that regardless of their domicile, companies with interests in the UK can expect to be affected due to the likely impact on tax exemptions currently enjoyed by virtue of the UK’s EU status. Potentially affected exemptions include the ability to claim derivative benefits, investments by EU taxpayers into UK companies becoming subject to the controlled foreign companies rules (CFC-Rules), and other applicable directives from which the UK must now withdraw.

Additionally, since the UK will remain a member of the OECD, G20, and WTO, it will continue to be a part of efforts to harmonize international trade and business practices. As a result, the UK – just like the EU – is committed to implementing the BEPS recommendations to tackle international tax avoidance, and will continue to subscribe to the Common Reporting Standard (CRS) and other transparency initiatives, as well as participating in the US FATCA reporting regime.

To read the CEO Insight article, click here.

Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.


About this Contributor

Tricia Schafer-Petrecz Headshot
Tricia Schafer-Petrecz
Public Relations and Social Media Lead

Tricia Schafer-Petrecz manages Vertex's public relations and social media functions. In her role as reporter for the Tax Matters blog, she coordinates and writes  pieces on industry trends, legislation and technology in the tax industry.  Tricia has over 20 years of experience managing public relations, corporate communications and generating thought leadership for the financial services and technology industries. Prior to joining Vertex, she was the Director of Public Relations for Fidelity National Information Services (FIS Global), a Fortune 500 company. Tricia has a B.A. in English, a B.A. in Communications, and a Master's degree in Communications from La Salle University in Philadelphia, PA.  She is also a member of the Public Relations Society of America (PRSA).

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