Taiwanese firms with operations in the UK might have to pay higher taxes if Britain fails to secure favorable trade terms during the process of leaving the EU, accounting and consulting firm PricewaterhouseCoopers (PwC) Taiwan said yesterday.
The exit negotiations might take two-and-a-half years and Taiwanese firms should reconsider their expansion plans in the UK and the EU as a whole to avoid negative effects, PwC Taiwan financial services leader Richard Watanabe (吳偉臺) said.
Of the 50 companies making the Taiwan 50 Index — an exchange-traded fund that tracks large-cap companies in Taiwan — 11 have subsidiaries or branches in the UK, making them susceptible to higher business and capital gains taxes as the Brexit drama pans out, Watanabe said.
Most of the companies are engaged in sales of consumer electronic products, while some supply auto parts, Watanabe said, adding that PwC’s calculations do not include financial service providers.
Taiwanese banks have six outlets in Britain and one each in France, the Netherlands and Belgium, PwC data showed.
EU member states enjoy free movement of goods, people and capital, and the right to establish, provide or receive services in other member states.
That means there is no business tax or extra licenses for UK-based operations setting up new offices within the EU, said Paulson Tseng (曾博昇), a tax services partner at PwC Taiwan.
“The benefits come as a package, and Britain cannot keep what it wants and drop the rest,” he said.
Stock dividend, business and import taxes could rise to 15 percent or higher for firms in the UK depending on the outcome of the negotiations, Tseng said, adding that uncertainty alone could dampen investment interest.
Investments in the UK by Taiwanese firms amounted to US$2.94 billion as of May, while investments by British firms in Taiwan totaled US$7.96 billion.
“Those firms should take an inventory of their UK exposure,” said Liang Hung-lieh (梁鴻烈), a legal partner at PwC Taiwan.
If they use the UK as a stepping stone to reach the EU market, the strategy might need reconsideration due to potential trade barriers, Liang said.
The impact would be negligible if the UK is their intended destination, he added.
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