Tax 

Lex Brexit – current status

An approved law regulating various areas of so-called hard Brexit passed the legislative process. Following the development of the situation, it will be promulgated in the Collection of Laws at the end of March unless a UK-EU agreement is agreed or Brexit is postponed.

Below we summarise the current situation as regards so-called Lex Brexit – act on the adjustment of certain relationships concerning the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union.

  • On 29 March 2019, it will be two years since the United Kingdom of Great Britain and Northern Ireland announced its intention to withdraw from the European Union following the outcome of a referendum. On the basis of a unilateral decision of the British nation to leave the EU, Article 50 of the Treaty on European Union was triggered in March 2017 and the Union is thus facing, for the first time, a situation in which the relationship with a hitherto significant member state is being abolished.
  • Part of the proposed UK withdrawal agreement is to negotiate the so-called transition period (from 30 March 2019 to 31 December 2020), during which the United Kingdom should be guaranteed a so-called third country status while simultaneously maintaining the status of a single market member.
  • With regard to the existing development and UK’s possible withdrawal without a proper agreement (so-called uncontrolled or hard Brexit), the government Committee for the European Union charged the Ministry of the Interior to prepare what is referred to as Lex Brexit. The government draft was approved by both chambers of the Parliament of the Czech Republic and signed on 7 March 2019 by President Miloš Zeman.
  • The main objective of this temporary legislation is to adopt measures through which the Czech Republic minimises at least some of the imminent negative impacts that will occur in case of a missing agreement (i.e. hard Brexit).
  • The recommendation issued by the Ministry of the Interior of the Czech Republic before the adoption of “Lex Brexit” is still in force and stipulates that a UK citizen who wishes to reside in the Czech Republic during the transition period should apply to the Ministry of the Interior of the Czech Republic (Department for Asylum and Migration Policy) for a certificate of temporary residence in the Czech Republic by no later than 29 March 2019.
  • In order to ensure legal certainty, Lex Brexit allows UK citizens and their family members to carry out their work under the employment contract concluded before the entry into force of the transitional legislation without a work permit, employee card or blue card, legally until the end of 2020. During the transition period, these citizens will have sufficient time to settle the necessary work permits in the Czech Republic, which are usually required from so-called third country nationals.
  • In terms of income tax, the taxpayer’s situation needs to be assessed – in the case of Czech tax residents, Lex Brexit considers for some time the United Kingdom as an EU member state. However, it does not apply entirely to the situation of UK residents (particularly the withholding tax and tax securement, which will be applied in case of hard Brexit from 30 March 2019).
  • Nevertheless, the measures cannot be applied in the case of taxes harmonised within the EU (VAT, excise tax) and customs duties where the rules as for third countries will apply (import-export) in the case of hard Brexit.

For tips on how to prepare for a possible hard Brexit, read our article “Brexit and its impact on your business: 10 steps to prepare for a “no deal” option”. We continue to monitor the situation and will keep you informed about further developments.

Lex Brexit Brexit