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Post-brexit, in which EU country should we open?

We trade across the EU/UK. Brexit has added >40% to our costs. Where's best to open a subsidiary?

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Our client is a dairy food broker.  Post-brexit their costs of transiting products through their UK warehousing facilities have spiralled. As an example, who knew that costs of a (tested, accredited, certified) tinned milk product imported into the UK from Germany would nearly double because each tin now needs to be examined by a Vet before it can be sold! Because a significant amount of B to B turnover is EU sales for EU sourced products we now need to set up an EU trading company.  For various reasons we are considering Luxembourg, Ireland and The Netherlands. It's relatively straightforwad to budget for set-up and running costs, but our main fear is the current and longer term tax consequences on the Group's profits. We would like the new business to be a subsidiary controlled out of the UK yet  granting a trading licence (with variable charges) may be the safest option. Any views? Has anyone Been there, Done that,  - yet?

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By paul.benny
10th May 2021 10:48

What's the physical supply route? Holding stock in a country almost certainly means you need to VAT register there.

You've described your client as a broker. That implies they introduce buyer and seller and take a fee, possibly from both. Is that actually what you mean? Or are they actually a distributor/reseller - ie take ownership of the goods? If so, are they larger than Small or Medium. If so, they'll need to think about transfer pricing.

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Replying to paul.benny:
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By Remidiah
10th May 2021 16:05

The client is trading as a wholesaler and has done, internationally pan-EU, for over 20 years. They have also accepted the extra VAT registration requirements. The trading route has always been using the UK as a hub yet that's no longer effective. The last key requirement is to retain control of tax on Global profits

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By tom123
10th May 2021 11:01

The inspection would follow the goods, regardless of the entities involved.

So, if you need to move physical warehousing, you also need to consider transport costs.

That would suggest mainland EU is preferable for you.

(CAVEAT - do 'Freeports' help? - I have no idea personally)

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Replying to tom123:
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By Remidiah
10th May 2021 16:12

Inspection is simply a pain . We know the legitimate reasons behind it but it's just an expensive unintended consequence of Brexit -and certainly NOT simply a teething issue (as described by the UK Government).

Yes, they are also considering freeports. On transportation: fortunately the EU suppliers can ship, on behalf of our client, to the final customers yet they do it in the client's name.

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Jason Croke
By Jason Croke
10th May 2021 14:01

Purely from a physical perspective, warehousing on mainland Europe makes more sense than Ireland, more so if the goods are perishable as the costs to ship from Ireland to EU are greater (and longer delivery times) than shipping between mainland EU member states.

Of the many member states you could have chosen, the only three you have selected are all famous for their low tax regimes.

I mention this because the responses you've had so far are looking at the movement of goods, establishing what it is you are selling, etc whereas I think your question is more about corporation tax than EU trading movements, again, you mention you want the control to remain in the UK.

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Replying to Jason Croke:
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By Remidiah
10th May 2021 16:18

Jason, you've hit the nail on the head. Taxation of profits is key. If we set up a client controlled BV in the Netherlands, the client my be liable for tax in the NL on global profits - less current/future(?) taxation reliefs. If we use an independent BV then global tax is not an issue yet transfer pricing/ licence charges must be used and must be water tight from tax avoidance threats. There's also the running costs of a new trading company to consider as the BV MUST have a local director etc.

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Replying to Remidiah:
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By paul.benny
10th May 2021 16:59

Remidiah wrote:
If we set up a client controlled BV in the Netherlands, the client my be liable for tax in the NL on global profits....
... the BV MUST have a local director...

Really? I thought the USA was the only jurisdiction that claims the right to tax profits wherever earned.

And requiring a local director? That's also news to me, having had Dutch subsids without local directors.

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A Putey FACA
By Arthur Putey
10th May 2021 14:56

Hang on few years, then Scotland!

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Replying to Arthur Putey:
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By Remidiah
10th May 2021 16:22

Best comment of the Day by far.
I am part Scottish and also served in the Scots DG. The only problem is I am against devolution, but there again I was also against Brexit :)

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