Brexit and Community rules. True effects

 | El Económico
Montse Más Llull (partner of the Palma de Mallorca Tax practice)

Although it has been a month since the Eurosceptics triumphed, with 51.9% of the vote, over the 48.1% of Brits who elected to remain part of the EU, the real effects of Brexit will take more than two years to materialize.

The political consequences were not long in coming, with the resignation of UK prime minister David Cameron and the appointment of Theresa May as the UK’s new leader. The former prime minister, who had supported the Remain campaign, stated that it would not be right for him to remain at the helm of the ship that would steer the country in the new direction chosen by the electorate.

Nevertheless, we can already form an idea of the difficulties that will abound in a new legal scenario still pending the result of the complicated negotiation process that will culminate in the UK leaving the EU.

What we do know, based on article 50.3 of the Treaty of Lisbon, is that EU treaties will cease to apply to the UK as from the date the withdrawal agreement comes into force or, failing that, two years after the notification of the decision to withdraw “unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.”

What is also true is that Brexit will allow the UK to assume full tax powers, no longer being subject to the rules on the free movement of capital, services and persons and the freedom of establishment.

But this is all we know for sure. Everything else is pure speculation.

While it may only be speculation and although they will not be affected for the moment, there is a clear need to plan for the future impact of Brexit on all British expats and workers posted to other EU countries, not to mention on EU expats in the UK.

The scenarios may differ, depending on the negotiations with Brussels. First of all, the automatic effect may be as drastic as it is simple: the free movement of workers between the UK and the rest of the EU would cease to apply, meaning that expats would have to obtain the relevant administrative authorizations and visas in order to live and work in the EU or the UK, as appropriate. The Community regulations governing the coordination of social security systems would also no longer apply, although there would undoubtedly be room for intermediate formulas to allow EU expats to continue enjoying benefits deriving from the free movement of workers, such as the adhesion of the UK to the European Free Trade Association (EFTA), thus enabling it to form part of the European Economic Area.

One thing we do know is that the British tourists who visit Spain each year (approximately 15 million in 2015) will be entitled to VAT refunds on goods they purchase in Spain to take back to the UK.

At this stage of the game, there is no doubt that Brexit will go ahead, although Bregret has shyly crept in. We still need a lot more time to ascertain the true effects.