Ready, Steady, Brexit

Shockwaves from this morning's announcement are still rippling through the media, the markets and foreign and UK government. The "leave" scenario that many business owners and public figures dismissed at first as fantasy has now been voted by a majority of the British public. As the dust settles, the impact of Brexit will become clearer, but for the moment we can begin to piece through what this decision may mean for business in Luxembourg and abroad. We'd like to offer some of our initial thoughts and suggestions, as tax advisers with strong knowledge of both markets and just how intertwined they have become.

What are the immediate repercussions for my business?

Barring any knee-jerk reactions (such as the closing of the border to immigrants), there are no immediate repercussions for businesses aside from any macroeconomic considerations (market instability) which may accompany the Brexit announcement. It is important to keep in mind that the referendum is not a legal instrument and a vote by the people to leave the European Union does not translate into automatic change. After the European Council is officially notified of Britain's intention to leave, a two year countdown begins, after which (barring any extensions), the EU treaties cease to apply to the UK. However, one can imagine that negotiations may take far longer than that. During this transition period, when negotiations take place on the terms of exit and nature of future relationships, nothing will change, legally speaking. European directives and regulations, including those on tax matters continue to apply until further notice. Beyond this legal analysis, "business as usual" is an unlikely scenario during this 2-year negotiation period. Businesses will have to plan for an end game without knowing its rules. For individuals, a similar hiatus will exist.

What long-term tax and regulatory effects can be expected?

Although we can only speculate on this matter, some changes are due to occur. The UK will need to negotiate trade agreements with the European Union and "find their place" on the global stage. We don't know how much Europe will be willing to cede to an independent Britain or how friendly the relationship will be after the split. However, we think that for UK businesses, the process to invest in Europe will become more costly, lengthy and complex. Management companies for EU domiciled funds may need to migrate from the UK into Europe, or find a European partner...