Brexit

A no-deal has been averted, but the scenario is complex

Paolo Besio Paolo Besio

After the UK Parliament rejected the agreement for an “orderly” exit of the UK from the EU for three times, on 11 April the representatives of the EU Member states accorded a “flexible” extension of the term to find an agreement on the exit conditions up to 31 October.

The UK can in any case exit the EU before the above term established if the UK Parliament votes for the existing draft deal or another deal that should be reached with the EU. Though in a rush, the hypothesis of the so-called “Hard Brexit” (initially planned for 29 March 2019 and then postponed to 10 April 2019), i.e. a no-deal exit that would have led to very negative consequences for economic operators.

As a required condition for the postponement, the participation EU imposed the participation of the UK in the European elections in May 2019. Also, the UK should keep contributing to the EU budget.

 Therefore, it would be reasonable to expect that the UK will try and exit by 22 May, in order to avoid participating in the elections and the renewal of EU bodies and so limit its obligations.

In such an uncertain scenario, Law Decree no. 22 dated 25 March 2019 was published on the Official Gazette no. 71 of 25 march 2019, aimed at safeguarding the financial stability and integrity of markets in case of a “no-deal”.

The decree was also issued to:

  • ensure continuity in the provision of bank, financial and insurance services by both persons residing in the UK and operating in Italy and those resident in Italy and operating in the UK.
  • regulate the exit from the Italian market of those subjects established in the UK which will end their activity in Italy.

The Decree provides a transition phase of 18 months starting from the date of exit of the UK from the European Union, indicating the effects that a “no-deal” will have on the operativeness of bank and insurance intermediaries.

During the transition period, the following will continue to be applicable to the UK:

  • domestic tax provisions deriving from its quality as State member of the EU (including those provided under EU directives)
  • domestic provisions deriving from the EU directive on VAT and on excise duties. The above provisions will be implemented through decrees of the Ministry of Economy and Finance.

Clearly, the scenario will keep changing.

Bernoni Grant Thornton Brexit Committee would be pleased to assist you. Should you need any information, please send an e-mail to: comitatobrexit@bgt.it.gt.com.