Setting up in the EU – An alternative solution to Brexit trade challenges?

Many businesses are still trying to get to grips with the new and changing EU-UK trade rules more than two years on from Brexit.

However, a growing number of UK companies are trying an alternative approach – setting up in the EU.

Prior to Brexit, this suggestion was touted by a number of different businesses as a means of getting around the complex trade rules and requirements.

Now new data from the government agency, Invest in Holland, shows that more than 90 investors have built or rented distribution space to British firms since 2017 – half of this activity took place in the last year alone.

The benefits of creating an EU hub

While trade relations between the EU and UK have, in most cases, improved to some degree since the initial impact of Brexit there are still challenges that persist, which can be complex and costly.

Setting up a distribution hub or  subsidiary business in the EU could help UK businesses to enjoy:

Freer trade – If a company can declare that they are an EU company it can enjoy the benefits of EU membership, including free trade. Any goods or services that they move between member states will be tariff-free and frictionless. However, if they transfer goods and services between the UK and the EU, they will still be subject to the changes associated with Brexit.

Less bureaucracy – Providing goods or services from the EU to other EU member states means that businesses face less red tape, which can help to speed up sales and delivery processes.

Local knowledge – Although the EU and UK remain aligned in many ways still, having a hub within the EU can provide access to EU workers who have a better knowledge of local markets and trading requirements.

Lower costs – Although setting up a base or hub in the EU may initially seem costly, it may prove to be more cost-effective as it eliminates some of the cost of transport and the complications brought on by the new trade arrangements.

Greater growth – Creating a new base in an EU country might also help a business to expand into new markets quicker than before and be a driver for growth overseas.

How to set up a company in the EU

Most companies who plan to expand their business with an EU hub or subsidiary do so as a European company or SE (Societas Europea).

This is a public limited liability company that allows your business to operate under a single European brand name across multiple member states while following a single set of rules.

To set up an SE company, you should:

  • Locate your registered office and your head office in the same EU country.
  • Have a subscribed capital of at least €120,000.
  • Have a presence in at least two EU countries.

In some cases, certain EU member states have additional requirements for an SE company, so it is important that you check this beforehand.

If you don’t meet the eligibility criteria or do not think this approach is right for you, you could choose to set up individual companies in different member states.

As the establishment of an overseas company or subsidiary could have an impact on the finances and tax position of your UK company it is important to seek advice from an experienced accountant beforehand.

To find out how we can help you establish new hubs overseas or advise you on other approaches to improve trade with the EU, please contact us.

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