Should I stay or should I go now? Mobility and Article 50

in Industry Insights, Luxembourg, Tax, 26.04.2017

Brexit has become a reality: the UK government recently triggered article 50 of the EU Treaty, officially starting the UK’s withdrawal procedure from the EU.

The aftermath of this initiation is likely to be disruptive: many expect new dynamics to emerge and constraints to make themselves known. However, as with any large shift—be it political, economic, or something else—there are opportunities worth focusing on as well. In this article, I will look at how Brexit affects issues of worker mobility, and what good there is to be had from this upending of the status quo.

Over there

On 6 April 2017, significant changes to the UK Immigration Rules for Tier 2 employer-sponsored migrants came into force. These changes significantly increase costs to UK employers when they sponsor non-European Economic Area (EEA) nationals to work in the UK: more specifically, minimum salary thresholds are higher, and additional and increased charges have been introduced. The changes will undoubtedly affect short- and long-term planning and decision-making within the private and public sectors, as well as have cost and resourcing implications for employers who rely on non-EEA nationals to support UK operations.

In other words: organisations in the UK may be rethinking how many EU workers they want to hire or keep.

UK (future) pensioners—but EU pensioners too—might be affected as well, with their careers and pension acquisition rights potentially facing new constraints and threats. The free movement of persons, as inscribed in the EU Treaty, will certainly have to be scrutinised in order to avoid potential side effects for individuals and their families.

Over here

EU officials, for their part, are already focusing on those EU workers, students and citizens in the UK who might be affected, for example those who might be unable to stay, to pay their taxes across the border, or to retain state health coverage for themselves and their families. As mentioned before, EU pensioners living in the UK will have to pay attention in the upcoming years.

Some of these EU citizens in the UK, especially those orbiting stars in London’s financial galaxy, will end up relocating as well—and many may be eying Luxembourg. As I live here myself, I admit that I am biased—but it’s undeniable that the Grand Duchy is not only a very [family] friendly place, but is also ready to take more skills on board to grow its existing business communities, notably in its insurance and alternative investment funds areas. Interestingly, Luxembourg has recently transposed the legal framework of EU directives 2014/36/EU and 2014/66/EU, and had a new law published in the Memorial A on 20 March 2017 offering five new types of residence permits dedicated to third-country high-net-worth investors desiring to relocate or set up business in Luxembourg.

Luxembourg is a gateway for skilled people and investors, and its government seems interested in opening the doors still further. Certainly, future Luxembourg-resident AIF Managers will be happy to know that the tax treatment applicable on carried interests and private capital gains may be also be part of a friendly welcome pack.

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