The Impact of Brexit on British companies in Romania
Much has been written about the impact of Brexit on the United Kingdom economy but very little has been written about its direct impact on United Kingdom investments and business in the European Union. As an international law firm in…
Much has been written about the impact of Brexit on the United Kingdom economy but very little has been written about its direct impact on United Kingdom investments and business in the European Union. As an international law firm in Romania dealing with foreign investment into Romania, we are seeing a rise in queries from companies as to how Brexit will affect all types of transactions including M&A deals and investments in relation to Romania.
The Trade and Cooperation Agreement set out the way of collaboration between the United Kingdom and the member states of the European Union and now after six months since the Agreement United Kingdom companies are now getting used to the new regimes. However, the Agreement has thrown up a number of issues relating to employment in Romania of United Kingdom nationals in Romania. If you are a United Kingdom investor and have a Romanian company, you need to look as to how that Romanian company will be affected. Further, the Romanian company needs to look at how its relationship with the United Kingdom will affect it.
The first thing to remember is that the United Kingdom companies will no longer be considered as participants in the European union's single market and thereby benefiting from the free movement of people, goods, and services. Before 2021 there was no issue in respect of the Romanian company having staff seconded to it from the United Kingdom. Now they must consider the terms on which an employee will be sent from England. Theoretically, they would be required to apply for a work permit if they were going to work in the Romanian company even for a short space of time. If the employee is coming for a few weeks, we are sure many employees will come into Romania on a tourist visa and work for less than 90 days and then leave Romania. This means that the Romanian company may suffer from a high turnover of United Kingdom staff and the disruption this may cause. If the employee is in Romania for more than 90 days, then a temporary residence permit will be required.
Then there will be the issue of export of goods to the United Kingdom. How will Romanian company deal with its relationship with its United Kingdom parent? Those with exports will now have to consider an export regime that they did not have to worry about before. Any transfer of goods to the United Kingdom will count as exports outside of the European Union. This will require a change in the application of VAT and other taxes. The common provisions of the system of VAT, excise duty, or customs formalities will no longer be applicable in relation to all dealings with the United Kingdom. Romanian tax lawyers will now have to take this into account when advising on these aspects.
The funding of the Romanian company may also become an issue. Whereas previously loans from the United Kingdom parent were not an issue as the parties were both parts of the European Union there is in the future the possibility that the National Bank and the authorities may start to look at transfers to the Romanian company from the United Kingdom in a different light. I am not saying that the transfers from the United Kingdom may be treated as a money laundering issue but that is possible. Banks may also look at transfers and amend their fees accordingly.
