www pwc nl Brexit Bye bye or hello

www. pwc. nl Brexit – Bye bye or hello dearest friend Strictly Private and Confidential April 2018 Pw. C

“Maintaining tariff-free access to the EU single market is a vital priority. It is where 75% of our food exports go, so all our farming and food business wish to achieve this outcome. ” Opinion of 71 of the UK’s largest food companies • Exit agreement • New trade relationship • Transition agreement? ! 2 Pw. C 6

Brexit has given rise to unbridled optimism – in the UK Pw. C 25

Distancing from the EU makes sense – if you look at the emerged spirits … Pw. C 30

Who are the key UK persons in Brexit? Pw. C

Timeline for leaving the EU Timing 2016 - 2020 Phase 1: Phase 2: The exit deal Transition (or implementation? ) Phase 3 a and 3 b: (bespoke) Trade agreement • Exit agreement • New trade relationship • Transition agreement? ! 6 Pw. C 6

What is frictionless trade? Pw. C

Article 50 is now triggered: 350 days and counting… EU priorities (agreed negotiation guidelines 29 April 2017): • Core principles (4 freedoms / no cherry picking!) • A phased approach to negotiations • Agreement on arrangements for an orderly withdrawal • Preliminary and preparatory discussions on a new relationship • Principle of sincere cooperation • Procedural arrangements for negotiations under art 50 Pw. C

Let’s go back to the referendum Why did the British people vote for Brexit? 1. Control over migration 2. European Court of Justice 3. Large contribution to the EU budget In other words: regain independence. But: England Wales vs Scotland Northern Ireland Pw. C

Brexit scenarios - getting clearer by the day EEA member (Norwegian option) Bilateral Agreement (Swiss option) Customs Union (Turkish option)* Free Trade Agreement (Canada model) No access agreement (WTO terms) Low degree of disruption to UKEU economic relations Medium degree of disruption to UKEU economic relations Significant disruption to UKEU economic relations • Application of four freedoms • Application of EU Regulations and Directives • Access to single market for FS via passporting • Contribution to the EU budget • Access to some areas of the internal market, at the cost of adopting the relevant EU regulations • Application of four freedoms • No influence over EU Regulations or Directives • Not part of the EU Customs Union and no access to intra-EU trade system • Not part of the EU’s internal market • No application of four freedoms • No influence over EU Regulations or Directives • Part of the EU Customs Union and access to intra-EU trade system for goods • Market access depending on the shape of the FTA deal struck • No application of four freedoms • No influence over EU Regulations or Directives • WTO terms od trade • No application of four freedoms • No access to the internal market • No UK contribution to the EU budget • Not part of the EU Customs Union and no access to intra-EU trade system Less disruption *A Customs Union scenario is discussed by the UK Labour party would depend on change of political leadership in the UK Pw. C More disruption

What happens if there is no deal? Trade in goods Workforce implications Exports to the UK as a % of GDP Top sender countries of migrants in the UK, based on citizenship 7% 1000000 6% 800000 5% 600000 4% 3% 400000 2% 200000 1% C ze ch H la n Po un g ar y ar k m en D R ep ub l ic an y er m s G rla nd d N et he la n Ire um lg i Be Pw. C 2015 2016 d In d Ire ia l Po and rt R uga om l an ia Li Ital th y ua Pa nia ki st Fr an an c Sp e ai n 0 0%

Especially if tariffs are re-introduced EU and UK industries facing the highest tariffs in a WTO scenario (weighted %) Pw. C

How about Agri. Food? Pw. C

Dutch industry highly exposed Pw. C

Three important areas to consider Trade and customs 1 What does trade between the EU (and other countries) and the UK look like following Brexit and what implications will this have on your supply chain / business? Pw. C People and immigration 2 What impact will changes to immigration in the light of Brexit have on your workforce and operating model and how can you prepare? Economics and policy 3 How will Brexit affect the economy and the value of the GBP vs EUR vs USD? How might changes to regulation impact your ability to do business across borders? Tax and legal impact?

Trade: non-tariff shipments- time delay at border UK-NL (Pre-Brexit) Nominal hours Preparation Transit up to 12 hours Dispatch NL arrival Total up to 12 hours UK-NL (Post-Brexit) 4 hours Preparation Up to 24 hours Declaration Total up to 70 -72 hours Pw. C Instantaneous/ up to 2 hours Clearance Transit 12 hours Dispatch 4 hours Preparation 2 hours Declaration Up to 24 hours Clearance

Introduction – the various scenarios - Internal market - to very high extend regulated centrally (not limited to duties and taxes) - results in free movement of goods (and services) s! form der o bor alitie N - Customs union - common outer tariff – no levy on trade within the Union - not necessarily on all product categories (i. e. agriculture) - applies to goods only levy ! No s e i t i mal r for orde B - different formats – depending on acceptance of each others standards (on health, safety, sanctions, strategic goods etc. ) Brexit - Customs and Trade Pw. C November 2017 17

Introduction – the various scenarios - Free Trade Agreements / Free Trade Area - no or reduced duties on products that meet preferential origin requirements vies d le n a s litie (i. e. limited to real ‘made in’ each others territory products) rma o f r rde l bo l i t - usually also covers services S - WTO terms (‘no deal’) vies le nd a s ie alit - duties due (rate within agreed upon boundaries) rm o f r rde l bo l i t S - often referred to as cliff edge scenario Brexit - Customs and Trade Pw. C November 2017 18

Attention points - what we see in the scenario’s - Internal market appears no feasible option (close to ‘no-Brexit’) transition period? - All remaining options do result in border formalities to be performed! o customs declarations will need to be filed (at both sides of the Channel) o depending on the type of deal and the sectors covered by it: physical inspections will need to be performed on a selection of shipments o declarations filed electronically – data needs to be available, infrastructure needs to be available, response time to be respected o majority of declarations processed fully automatically – still post-clearance audits o no central customs clearance in the UK for the EU anymore Brexit - Customs and Trade Pw. C November 2017 19

Attention points - what we see in the scenario’s o VAT (at import) will need to be collected o Increased lead-times! o UK companies can no longer make use of the simplifying/beneficiary EU VAT regimes: o distance sales o MOSS for electronic and telecommunication services o simplified triangulation with UK VAT numbers o EU VAT refund requests will become 13 th Directive VAT refund requests with more formal procedures and longer lead-times for refunds Brexit - Customs and Trade Pw. C November 2017 20

People Objective: to protect the rights of all citizens concerned regarding the consequences of withdrawal Clarification status regarding citizen rights (nov -2017) Convergence Discussion about transition period No change rights and status until UK leaves EU Convergence Further discussion required Divergence Maintenance permanent residence if > 5 years in UK December 2017 Start key negotiations Brexit Seminar Pw. C Frontier workers retain status and rights Conclusion of ‘divorce settlement’ No clarity about free movement rights Different positions on family reunification Divergence about role of European Court of Justice No clarity on right to export social security benefits Impact students fully dependent on outcomes withdrawal agreement 21

The employee starts asking questions… Is my contract still valid? What about my pension? Expat Business traveler What about my family? International local hire Am I allowed to stay? Do I need to file taxes differently? Will my salary be affected? Am I still insured? Brexit Seminar Pw. C 22

How about the impact on your business? Expat Governance Compensation and assignment policies Employment contracts Communication and engagement! Workforce planning Administrative burden International local hire Cost effects Talent management and recruitment Fiscal implications Social security coverage Immigration requirements Brexit Seminar Pw. C Business traveler 23

Action plan: what to do? Immediate next steps No change in rights and status until UK officially leaves EU? Potential transition period of circa 2 years? Completely mapping out potentially impacted employees Future next steps Asses, plan and start compliance precautions Clearly communicate potential impact and engage employees Change policies and employment contracts where needed No need for immediate action, but instead take precautions Review current policy and workforce planning and anticipate on possible changes Discuss possible future steps given different scenarios Fully align workforce planning, talent management, recruitment and governance with outcomes Brexit Seminar Pw. C 24

Legal and direct tax Intellectual property Contracts Corporate European Corporations General Data Protection Regulation (GDPR) Direct tax – no EU directives Pw. C Brexit Seminar Pw. C 3

Intellectual property Developments in IP in terms of Brexit Trademarks & brands Tradenames Industrial design & models IP • Community type of IP rights no longer effect in UK • European Patents not affected (EPT) • UK to ratify Unitary Patent & Unified Patent Court probably to remain in London • Copyrights governed by national laws; Directives and Court of Justice EU rulings no longer applied • European Position Paper in regard to intellectual property rights (6 September 2017): “EU IP rights must be upheld post-Brexit with no further action or cost from the IP holder”: Copyrights ◦ recognize Community rights/applications in UK ◦ no financial cost for EUIP holder Patents ◦ apply the rules on e. g. genuine use within EU Plant breeders right ◦ IPRs exhausted in the EU include UK • Reconsider governing law and dispute settlement provisions in IP license agreements Pw. C Brexit Seminar Pw. C 4

Contracts What is the impact of Brexit on your contracts? Governing law and forum clauses Territorial scope clause affecting the contract Governing law and forum clauses, change of circumstances / change of law “In the event of a change of circumstances or the applicable law and/or regulations unforeseen at the moment of signing of this Agreement, each Party shall have the right to suggest an amendment of the Agreement to bring it in line with the changed circumstances and/or rules in a way which observes the (other) provisions of this Agreement and the intention of the Parties thereto. The other Party shall accept such amendment unless any compelling reasons not to accept such amendment exist which overrides the interest of both Parties to such amendment, in which event both Parties will discuss a viable solution in good faith. ” “This Agreement shall be governed by, and construed in accordance with the laws of England Wales. Any and all disputes between the Parties arising from or in connection with this Agreement and/or any agreement, arrangement or undertaking arising from this Agreement shall be submitted to the exclusive jurisdiction of the competent court in England Wales. ” "Manufacturer hereby appoints Distributor as distributor of Equipment in the Territory, as defined hereafter, as of the date of execution of this Agreement and Distributor accepts such appointment and agrees to respect all the terms and conditions set out hereinafter. For the purpose of this Agreement, Territory shall means the territory composed of all European territories of the countries in which the Treaty on the European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU) are applied”. "[. . . ] Territory shall mean the territory composed of all territories of the countries that are member of the European Union pursuant to the Treaty on the European Union”. Territorial Scope Clauses Pw. C Brexit Seminar Pw. C 5

Contracts What is the impact of Brexit on your contracts? Material adverse change / force majeur clauses Material adverse change or force majeur claim v Assessment of trade flow, supply chains and key contracts; o Contracts regarding supply of goods and services; o Contracts with pricing mechanism (changes in tariffs); o Distribution contracts with a territorial clause; v Force majeur, change of circumstances / change of law could be a ground for termination or adaptation of a certain contract “Neither Party shall be liable or considered in default for breach or failure to perform any obligation under this Agreement because of a circumstance of force majeure (overmacht). For the purpose of this Agreement force majeure is understood to be any event beyond the control of the parties and is unforeseen, or if foreseen, is unavoidable, and which prevents the completion of any of the obligations of the parties under this Agreement. Acts of force majeure shall include strikes; fire; natural calamities such as storms, floods or earthquakes; restraints affecting shipping or air traffic; civil disorder such as war rebellion or riots; acts of any government Authority having jurisdiction over the parties. Any Party claiming a circumstance of force majeure shall promptly notify the other Party, describing in detail the event of force majeure and the interference, prevention or restriction on such Party's performance of its obligations under this Agreement and its expected duration. ” Pw. C Brexit Seminar Pw. C 6

Contracts Actions regarding contracts ol 1. D ue r nt lig di Co. 4 e c en 3. ju Ad t st c pa ne re t go se e t ia 2. im ly a n A Pw. C Brexit Seminar Pw. C 7

Or will they live happily ever after? Pw. C

Thank you Pricewaterhouse. Coopers Belastingadviseurs N. V. Fascinatio Boulevard 350 P. O. Box 8800 3009 AV Rotterdam The Netherlands T: +31 (0) 88 792 36 80 M: +31 (0) 6 10 02 95 71 jan-willem. thoen@pwc. com Jan-Willem Thoen Senior Director | UK- NL Tax Team Pw. C